Technical Picture And Key Levels
On the daily chart, EUR/JPY remains above the 100-day exponential moving average at about 181.70, keeping a mildly bullish bias. Price is near the Bollinger middle band at 183.53, pointing to consolidation, while the RSI at 52.71 is just above neutral. Support is seen at 183.50, then 182.00, with a deeper floor near 181.70. Resistance sits near 184.70, with the upper Bollinger Band around 185.80. With EUR/JPY softening due to Middle East tensions, we must consider the increased demand for the Yen as a safe haven. This geopolitical risk means we should anticipate higher volatility in the coming weeks. The current dip to around 183.85 is a direct result of capital flowing towards safety. However, we should not ignore the underlying monetary policy divergence that has supported this pair for years. Looking back, the Bank of Japan’s historic decision in March 2024 to end negative interest rates was a major shift, yet subsequent rate hikes have been cautious due to inconsistent inflation data. This contrasts with the European Central Bank, which began its own rate-cutting cycle in mid-2024, creating a fundamental tailwind for the cross. For derivative traders, the immediate takeaway is the likely rise in implied volatility from the subdued levels we saw in late 2025. The CBOE Volatility Index (VIX) has already ticked up over 15 this month, reflecting broader market anxiety which will spill over into currency options pricing. This makes buying options more expensive, but also potentially more necessary as a hedging tool.Options Hedging Approach
A prudent strategy would be to purchase put options to protect against a sharp decline if the conflict escalates. We could target strikes below the key 100-day EMA support level around 181.70. This acts as an insurance policy on any long positions we hold, safeguarding against a sudden break in market structure. At the same time, the cooler Japanese inflation data suggests the uptrend could resume if geopolitical fears recede. We can use this technical setup by selling out-of-the-money calls, perhaps with a strike price above the 185.80 resistance level. Using the premium from selling these calls can help finance the purchase of the protective puts, creating a collar that brackets our exposure. Create your live VT Markets account and start trading now.
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