EUR/JPY extended gains for a fourth session, trading near 185.30 in Asian hours on Wednesday. The cross stayed above the nine-day and 50-day Exponential Moving Averages (EMAs), clustered just under 185.00, while the 14-day Relative Strength Index (RSI) hovered around 53, pointing to mildly positive momentum that is not yet overbought.
On the daily chart, price action sat near the upper boundary of a descending channel at about 185.40. A sustained break above the channel could open a move towards the record high of 187.95, set on 17 April, whereas support is seen first at the 185.00 psychological level, alongside the nine-day EMA at 184.99 and then the 50-day EMA at 184.89. If that zone gives way, attention turns to the three-month low of 181.87 from 16 March, followed by the five-month low of 180.81 reached on 12 February.
Technical Positioning and Channel Breakout Potential
We are closely watching the EUR/JPY cross as it challenges the key 185.40 resistance level. The pair is showing strength by staying above its key moving averages around 185.00. A sustained move above 185.40 would signal a bullish breakout from its recent downward channel, prompting a more aggressive long position.
Fundamental Drivers and Trade Strategy
This technical strength is backed by recent fundamental data from the Eurozone. The latest Harmonised Index of Consumer Prices (HICP) for April 2026 came in at 2.7%, higher than the 2.5% forecast, which reduces the likelihood of an early European Central Bank rate cut. This divergence in monetary policy expectations is providing a strong tailwind for the Euro against the Yen.
Meanwhile, the Bank of Japan is reinforcing its dovish stance, further supporting our view on EUR/JPY. Following last week’s data showing Japan’s national Core CPI slowing to 1.9%, the BoJ governor stated a commitment to maintaining an accommodative policy to ensure sustainable wage growth. This has historically kept pressure on the yen and is likely to continue doing so.
Given this setup, we believe buying out-of-the-money call options with a strike price near 186.00 and a July 2026 expiration is a prudent strategy. This allows us to participate in a potential rally towards the April high of 187.95. The limited premium paid for the options defines our maximum risk should the breakout fail to materialize.
However, we must manage our risk if the price is rejected at the channel’s upper boundary and falls below 185.00. Such a move would invalidate the bullish thesis and could trigger a slide towards the March low of 181.87. In that scenario, we would look to exit any long positions and consider purchasing puts to trade the downward momentum.
