EUR/JPY extended gains after rising over 0.5% in the previous session, trading near 184.90 in Asian hours on Monday. Despite the broader uptrend, the cross remains below both the 50-day and nine-day Exponential Moving Averages (EMAs), keeping the near-term bias skewed lower. The 14-day Relative Strength Index (RSI) stands at 45.66, below the midline, suggesting momentum has cooled while prices stay capped under the short-term EMA band.
On the chart, EUR/JPY is hovering near the lower edge of a symmetrical triangle around 184.40, pointing to consolidation. A break beneath that boundary would intensify downside pressure towards the three-month low of 181.87 set on 16 March, and then the near six-month low of 180.81 from 12 February. On the topside, resistance is seen at the 50-day EMA at 185.05, then the nine-day EMA at 185.28, with the triangle’s upper boundary around 186.30. A further move higher would bring the record peak of 187.95 from 17 April back into view.
Bearish Outlook and Downside Risks
We are observing the EUR/JPY cross consolidating within a symmetrical triangle, with a critical support level around 184.40. The technical indicators, such as the RSI lingering below 50, suggest that the immediate path of least resistance is to the downside. Our attention is focused on whether this support will hold in the coming days.
Given the weak momentum, we are positioning for a potential bearish breakdown. Recent data showing German industrial output unexpectedly falling by 0.5% and last week’s Eurozone core inflation dipping to 2.4% adds weight to this view. We are considering buying put options with strike prices below 184.40 to capitalize on a potential move toward the March low of 181.87.
Adding to our bearish sentiment are renewed warnings from Japanese finance officials about “excessive yen weakness,” which increases the probability of market intervention. Historically, even verbal intervention has been enough to trigger sharp JPY rallies, which would pressure this pair downwards. We are therefore cautious about any upside moves, viewing them as potential selling opportunities.
Upside Scenarios and Volatility Strategies
However, we remain prepared for an upside break, with the 50-day EMA at 185.05 acting as the first major hurdle. A sustained close above this level, followed by a break of the triangle’s upper boundary near 186.30, would invalidate our bearish thesis. In that scenario, we would pivot to look at call options targeting the April highs.
The tight consolidation has compressed implied volatility, making options relatively cheap. This presents an opportunity for strategies like long straddles, which would profit from a significant price move in either direction. We anticipate volatility will expand sharply once the triangle pattern resolves in the next couple of weeks.
