The EUR/JPY exchange rate is currently at 175.65 in early European trading on Monday. The outlook looks positive, as the price is holding above the 100-day EMA and the 14-day RSI is above 56.85, indicating upward momentum. **Resistance Levels and Targets** The resistance for EUR/JPY is found between 176.90 and 177.00, aligned with the high from October 13. If the price breaks through this range, it could rise to targets of 178.00 and then 178.50. On the downside, the first support level is at 174.82, the low from October 17. If it drops below this level, the price may decline further to 172.35 and potentially to 171.25. The Japanese Yen is under pressure because of expectations for continued easy monetary policy. A delay in raising rates by the Bank of Japan (BoJ) could further weaken the Yen, boosting the EUR/JPY pair. The upcoming release of the German PPI and Japan’s Prime Minister election will impact economic sentiment in both regions. Sanae Takaichi is expected to be elected Prime Minister, which raises market hopes for expanded fiscal measures and ongoing policy easing. **Impact of ECB and BoJ Policies** The Yen’s performance is linked to BoJ policies, US-Japan yield differences, and global risk sentiment. In the past, the Yen weakened due to ultra-loose policies (2013-2024), but recent gradual adjustments may provide some support. As we start the week, the EUR/JPY remains bullish above 175.50. The market is pricing in the likely election of Sanae Takaichi as Japan’s next Prime Minister, suggesting continued loose monetary policy. This supports the Euro and adds pressure on the Yen. In Japan, the Core CPI for September was 1.8%, further below the BoJ’s 2% target. This gives the new leadership a reason to postpone significant interest rate hikes, which contributes to the weak Yen. Traders are now more willing to bet against the Yen for the foreseeable future. Meanwhile, European Central Bank officials signal a hawkish stance, as Eurozone core inflation remains stubbornly above 3%. This difference in policy is widening the gap between German and Japanese 10-year government bonds to over 360 basis points. The carry trade favoring the Euro over the Yen is very appealing in this context. For derivative traders, this environment supports purchasing call options on the EUR/JPY or creating bull call spreads to manage costs. We see the 177.00 level as the main resistance, and breaking through it could lead to our next target of 178.00. Using options allows us to take advantage of this expected price increase while managing our risk. It’s crucial to manage risk, especially considering the Yen’s quick recoveries in 2024 when policy shifts were initially announced. A decisive break below the 174.82 support level would be a warning sign that this trend may be weakening. Cautious traders might consider buying inexpensive out-of-the-money puts as protection against unexpected policy changes or shifts in market sentiment. Create your live VT Markets account and start trading now.

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