The EUR/JPY exchange rate saw small gains, trading around 177.15 during early European hours on Thursday. The Yen lost ground against the Euro due to better risk sentiment and uncertainty about the Bank of Japan’s actions, which could impact the Yen. The technical outlook for EUR/JPY looks strong, as it remains above the 100-day EMA and the RSI is at 55.60, above the midline. Immediate resistance is at 178.23, with potential movement toward 178.45. On the downside, initial support is at 175.70, and declines could reach 175.00.

Factors Affecting the Japanese Yen

The Japanese Yen is heavily influenced by the Bank of Japan’s policies, Japan’s economic performance, bond yield differences, and global risk sentiment. The Bank of Japan’s (BoJ) ultra-loose monetary policy from 2013 to 2024 weakened the Yen against other currencies. However, the gradual shift away from this policy has started to support the Yen. When risk sentiment is low, many investors choose the Yen as a safe haven. The BoJ’s decisions can also impact the currency, as they sometimes intervene to influence the Yen’s value. The difference in bond yields between Japan and the US, driven by differing monetary policies, also affects the Yen. The BoJ’s policy shift is narrowing this gap. As of November 6, 2025, the EUR/JPY pair is keeping above the crucial 177.00 level, which acts as an important support point. The Yen’s weakness comes from expectations that the new Prime Minister will push for increased government spending, discouraging the BoJ from raising interest rates. This political context supports a continued rise in the currency pair in the upcoming weeks. To support this view, Eurozone core CPI for October came in slightly above expectations at 2.8%, which maintains a hawkish stance for the European Central Bank. In contrast, Japan’s recent Tankan survey showed reduced business confidence, giving the BoJ further reason to postpone tightening policies. This growing divide between central bank strategies strengthens the case for a long position in EUR/JPY.

Trading Strategies and Outlook

For traders anticipating a price increase, buying call options with a strike price of 178.00 set to expire in early December could be a way to benefit from a potential rise past the recent high of 178.23. This strategy offers direct exposure to the upside while limiting the maximum loss to the premium paid for the option. It’s a simple approach to act on positive technical and fundamental signals. A more risk-managed approach is to use a bull call spread. This would involve buying a 177.50 call while also selling a 179.00 call with the same expiration. This setup lowers the initial trade cost and benefits from a moderate rise toward the 179.00 psychological level. However, it’s important to monitor the 175.70 support level closely. A clear break below this level would invalidate the positive outlook and could result in a sharper downturn. In such a case, purchasing put options with a strike near 175.00 may be an appealing strategy to profit from a move toward the September lows. The interest rate difference supports this outlook too, as the spread between US 10-year bonds and Japanese government bonds has widened to over 350 basis points. Historically, such a broad differential has consistently pressured the Yen. This environment makes holding long Euro positions against the Yen through derivatives more attractive. Create your live VT Markets account and start trading now.

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