FX.co ★ EUR/JPY

EUR/JPY is seen trading positively at 176.78 at the time of writing, in the European session on Monday. However, the currency pair's upside could be limited by a hawkish tone from the Bank of Japan (BoJ). The BoJ kept rates on hold last month but stressed its intention to contain inflation risks, keeping the probability of a December rate hike in view. According to the minutes from the BoJ's September meeting, released on Thursday, most policymakers agreed that additional interest rate hikes would be necessary as inflation nears the 2% target. According to former Bank of Japan (BoJ) chief economist Seisaku Kameda, the Japanese central bank will hike rates in December and continue raising interest rates next year, up to 2%, to cope with rising inflation risks. OCBC analysts point out that "the standout has been the JPY" in recent trading. This is because "its recent performance reinforces its value as a hedge against a reversal in the US-centric AI trade." However, "it is probably too early to expect sustained JPY gains purely on AI concerns." In the future, OCBC believes that "more frequent US-centric AI volatility in 2027 will add to its hedge value," since the "sell-off is generating competing forces for the USD. The reason behind that is that "falling US yields are weakening the USD's safe-haven appeal, leaving the JPY as the standout hedge against US-centric volatility. OCBC also highlights domestic Japanese capital movements as an additional factor that could drive the yen higher. "Japanese portfolio rebalancing" is seen as the other potential JPY catalyst, with markets watching GPIF's July-September performance for signs of a domestic allocation switch. In addition, "CBC mentions that if GPIF and other Japanese investors bring home their cash or hedge more of foreign portfolio exposure, this structural element of JPY selling may lose its importance," hence "another factor boosting the JPY. On the daily chart, EUR/JPY shows bearish near-term sentiment as spot remains below the 100-day Simple Moving Average (SMA) and the Bollinger Bands' middle line. Price is confined within the lower part of the Bollinger envelope, with the lower band as the first downside reference level, and an RSI of 44.39 indicates reduced momentum but not oversold conditions. As for resistance, the first level is the Bollinger middle band around 176.80, followed by the upper Bollinger band at 178.30. A break above this level could move toward the psychological level of 180.00 and then toward the 100-day SMA at 181.50. On the downside, the November 2 low of 175.70 becomes the first support level for the cross, followed by the lower Bollinger Band boundary at 175.30. Any breach below this level could trigger a move toward the October 6, 2025 low of 174.74.