EUR/JPY slipped toward 185.00 in early European trading on Tuesday. The Japanese Yen strengthened after Prime Minister Sanae Takaichi won Japan’s snap election on Sunday.
The ruling Liberal Democratic Party won 316 of 465 seats in the lower house. This is the first time a single party has won a two-thirds majority since World War II.
Focus is now shifting to fiscal policy, including discussions about cutting sales tax on food. Markets are also asking how new spending plans, including defence spending, would be funded.
Japan’s government is expected to submit its nominee as early as February 25. The nominee must be approved by both the lower and upper houses of the National Diet.
The Finance Minister said the government wants to pass next year’s budget and tax reform as soon as possible. These developments could influence future currency moves.
On the daily chart, EUR/JPY is holding above the 100-day EMA at 180.62. The RSI is 54 (neutral), and Bollinger Bands are narrowing slightly.
Resistance sits at 186.28, near the upper band. Support is at 184.37, near the middle band, followed by 182.46 at the lower band.
EUR/JPY is stabilising near 185.00 after the yen’s brief jump following the LDP’s election win. With the RSI neutral at 54 and Bollinger Bands tightening, the pair may be entering a consolidation phase. That points to smaller near-term price swings.
If volatility stays low, some traders may look at strategies that benefit from calmer markets. One-month implied volatility has dropped to around 7.5%, which can make option-selling strategies more appealing. An iron condor, with strikes placed outside the near-term support and resistance levels of 184.37 and 186.28, could work over the next couple of weeks.
That said, the longer-term picture still leans toward yen weakness if the new government pushes more expansive fiscal policies. A similar pattern appeared in 2025, when early yen strength faded after investors began pricing in the impact of higher government spending. This backdrop supports a bullish EUR/JPY view over the coming months.
Low volatility can also create a chance to position for a later move higher. Longer-dated call options (for example, April or May expiries) may be cheaper while implied volatility is depressed. This approach targets upside while keeping the initial cash outlay limited.
One key date is February 25, when the government is expected to submit its nominee. This could bring volatility back into the market, so it may be wise to close short-volatility trades before then. As the date approaches, uncertainty often lifts option prices.
On the euro side, recent Eurozone inflation printed slightly above expectations at 2.3%. That supports the European Central Bank’s steadier stance. This contrast—potential fiscal expansion in Japan versus a watchful ECB—adds support to the broader bullish case for EUR/JPY.
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