EUR/JPY Price Forecast: Holds gains above 185.00, bullish momentum prevails

The EUR/JPY cross trades in positive territory for the third consecutive day near 185.20 during the early European session on Tuesday. The Japanese Yen (JPY) weakens against the Euro (EUR) amid political uncertainty in Japan after a report that Japan’s Prime Minister Sanae Takaichi may call an early general election in the first half of February. 

Furthermore, the lack of clear guidance on the timing of future interest rate hikes by the Bank of Japan (BoJ) could undermine the JPY and act as a tailwind for the cross. Markets view the BoJ's approach to ending its ultra-loose monetary policy as very cautious and slow. 

However, verbal intervention from Japanese authorities might cap the downside for the JPY in the near term. Japan’s Finance Minister Satsuki Katayama said on Tuesday that she is concerned about the JPY’s one-sided decline with US Treasury Secretary Scott Bessent and added that the tolerance for weakness was limited.

Technical Analysis:

In the daily chart, EUR/JPY holds well above the rising 100-day EMA at 178.68, keeping the medium-term uptrend intact. The positive slope of the average supports trend continuation. RSI at 66.82 is advancing, confirming firm bullish momentum without overbought conditions. Spot has nudged above the upper Bollinger Band at 185.15, indicating stretched upside. The bands have narrowed in recent sessions, reflecting reduced volatility and could precede a breakout or mean reversion.

If momentum fades, initial support aligns with the middle Bollinger Band at 183.77, with the lower band at 182.40 as the next cushion. A push above 70 on the RSI would tilt conditions into overbought and could trigger a pullback toward the mean. The distance to the 100-day EMA offers a deeper floor for the trend if a correction unfolds. Sustained acceptance above the envelope would keep the topside path open and maintain buyer control.

(The technical analysis of this story was written with the help of an AI tool.)