EUR/JPY is slightly up, trading around 182.75 in early European trading. The outlook remains positive due to strong RSI momentum, with resistance at 182.82 and initial support at 181.18. The Japanese Yen is losing value against the Euro because of worries about Japan’s finances, especially related to Prime Minister Sanae Takaichi’s spending plans and economic growth.

Bank Of Japan’s Influence

The upcoming interest rate decision from the Bank of Japan may impact the Yen’s value. There are rising expectations for a rate hike, which could strengthen the JPY and create challenges for the EUR/JPY cross. A Reuters poll indicates that 90% of economists expect the rate to rise from 0.50% to 0.75% in the BoJ’s December meeting, up from 53% last month. On the daily chart, the pair is trading above the 100-day EMA at 175.89, supporting an uptrend, even though the RSI is slightly overbought at 68.85. The price is close to the upper Bollinger Band at 182.82, indicating bullish pressure. The narrowing bands could point to a potential directional shift. A pullback may lead to support levels at 181.18, with additional support at 179.53. A close above the upper band could result in new highs. Currently, the EUR/JPY pair is gaining strength, moving toward the 182.82 resistance ahead of the weekend. While the bullish trend persists, the upcoming Bank of Japan meeting next week is causing market tension, creating a contrast between current momentum and a significant risk event.

Market Speculation On Rate Hike

Markets are anticipating a high chance of a rate hike, with estimates moving from 0.50% to 0.75%. This speculation is driven by Japan’s latest core CPI data for November, which held stubbornly at 2.9%, well above the central bank’s target. The sharp gain in JPY after the BoJ’s first hike back in March 2024 sets a clear precedent. On the Euro side, the European Central Bank’s recent dovish stance adds complexity. The ECB has reduced rates twice in the second half of 2025 to address slowing growth, leading to a clear monetary policy divergence favoring the Yen. This fundamental pressure may limit any further upside for EUR/JPY, despite current technical strength. Given the binary nature of the upcoming BoJ decision, traders might consider strategies that profit from significant price moves. Implied volatility for one-week EUR/JPY options has jumped over 30% in the past month, signaling market expectations for a breakout. This suggests that long volatility strategies, like straddles or strangles, could be wiser than simply betting on a direction. If the BoJ surprises by holding rates steady, the JPY could weaken significantly, potentially pushing EUR/JPY through 182.82 resistance and into new highs. On the other hand, if the expected rate hike happens, the price could quickly test the initial support at 181.18. A drop below that level would shift focus to the lower Bollinger Band near 179.50. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now