EUR/JPY is on the rise again, recovering from a two-day drop and trading close to 172.40—its highest level since July 17, 2024. The outlook remains positive, with the RSI at 72.85 showing overbought conditions but no signs of a reversal. The Euro is gaining strength against the weaker Japanese Yen, benefiting from key differences in policy between the ECB and BoJ. The currency pair has reached a new yearly high, climbing 0.67% today due to Yen weakness and ongoing bullish movement.

ECB and BoJ Policy Differences

The ECB is lowering rates as inflation nears the 2% target. While they are considering ending rate cuts, uncertainties around global trade persist. On the other hand, the BoJ keeps its rate at 0.50% and is gradually reducing JGB purchases, focusing on a healthy wage-price cycle. This boosts EUR/JPY. Technically, the pair has moved above 172.40, supported by the 20-day SMA at 169.42, and maintains bullish momentum without immediate signs of a reversal. The RSI at 72.85 and ADX at 43.72 indicate a strong upward trend. Support levels are at 170.00 and 169.50, with a potential to test the 173.00-174.00 range. This setup suggests a continued positive outlook as long as support holds.

Trend Analysis and Projections

The pair is trading near its highest level in over a year, showing strong movement even after earlier drops this week. This indicates a clear directional trend, mainly due to differences in the policies of the two central banks. The Relative Strength Index (RSI), nearing 73, indicates overbought conditions but is not showing any divergence or loss of momentum, suggesting there’s still strength in the trend. The Euro continues to rise against the Yen, driven by policy decisions. The Bank of Japan is taking a cautious approach to reducing stimulus. Meanwhile, the ECB’s slightly less aggressive stance still supports the Euro’s rate advantage. This creates a wider yield gap, directly influencing market activity. From a technical standpoint, levels above 172.40 confirm that buyers are committed to higher bids with minimal retraction, indicating strong conviction. The pair is also comfortably above its 20-day simple moving average, reinforcing the upward trend. The ADX readings above 40 show strength; such levels rarely appear in unclear market conditions. Support at 170.00 and lower at 169.50 provides clear points to watch, particularly as we look towards the next resistance zone between 173.00 and 174.00. The landscape ahead is clear, meaning that pullbacks would still fit within a broader upward trend for now. Given these conditions—a clear trend, differing policies creating imbalances, and strong technical indicators—we expect further testing of higher levels before any signs of fatigue show. Currently, sharp reversals are unlikely, minimizing the chance of sudden changes in market sentiment unless unexpected macro data comes from either region. For now, medium-term momentum remains strong above 170.00. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now