EURJPY – Yen Strength Builds as Euro Momentum FadesEuro/Japanese YenFX:EURJPYultreosforexEURJPY is showing signs of exhaustion after a strong October rally, with lower highs forming as yen demand rebuilds on growing expectations that the Bank of Japan could slowly move toward policy normalization. The euro, while still supported by relatively higher yields, is beginning to lose its edge as growth in the Eurozone cools and traders rotate into safer assets. The pair now looks poised for a measured pullback toward key support zones around 175.90 and 175.10. Current Bias Bearish in the short term, with the potential for a deeper correction if the yen continues to attract safe-haven demand and BOJ expectations remain firm. Key Fundamental Drivers BOJ Policy Shift: Governor Ueda’s subtle hawkish tone has kept market participants cautious, as inflation remains near target and policymakers hint at a gradual reduction of yield curve control. Eurozone Data: Growth remains stagnant and inflation continues to moderate, reducing the likelihood of any further ECB tightening. Global Risk Sentiment: Heightened geopolitical and trade tensions (tariff headlines, global policy uncertainty) are reviving JPY demand as a defensive asset. Macro Context The macro picture increasingly favors JPY stability. Japanese bond yields have risen modestly as the BOJ signals more flexibility, narrowing the interest rate gap that previously supported EURJPY. Meanwhile, Eurozone industrial output is slowing, and Germany’s manufacturing data continues to drag regional growth expectations lower. Commodity flows are neutral, though risk-sensitive currencies like the AUD and NZD remain under pressure, indirectly benefiting the yen. Europe’s reliance on external energy imports and weaker export activity keep the euro capped. Interest rate expectations: BOJ: Market pricing leans toward an early 2026 policy adjustment or an incremental tightening if inflation holds above 2%. ECB: Rates are expected to remain unchanged well into 2026, but forward guidance has turned notably neutral. Primary Risk to the Trend A reversal could occur if BOJ policymakers emphasize patience or dismiss near-term tightening expectations, weakening the yen. On the flip side, any stronger-than-expected Japanese inflation data could accelerate JPY gains and deepen the EURJPY correction. Most Critical Upcoming News/Event BOJ policy meeting minutes and Governor Ueda’s upcoming comments Eurozone GDP and inflation revisions Global equity and bond yield direction (key risk sentiment drivers) Leader/Lagger Dynamics EURJPY typically acts as a leader among yen crosses due to its liquidity and yield sensitivity. It often influences moves in GBPJPY and CADJPY, while loosely following the broader EURUSD trend during high-volatility sessions. Key Levels Support Levels: 175.90 / 175.10 Resistance Levels: 177.50 / 178.80 Stop Loss (SL): 178.90 Take Profit (TP): 175.90 (initial), 175.10 (extended) Summary: Bias and Watchpoints EURJPY’s structure suggests a bearish bias, with potential for a measured move lower as market sentiment tilts toward the yen. The focus remains on 175.90 as the first key target, followed by 175.10 if downside momentum accelerates. The stop-loss at 178.90 allows for short-term volatility while protecting against false reversals. Fundamentally, BOJ policy dynamics and Eurozone growth stagnation remain the dominant forces. Unless the BOJ backtracks sharply or Eurozone data surprises to the upside, the path of least resistance points lower. Traders should monitor upcoming BOJ commentary and Eurozone inflation figures as key catalysts for confirming continuation or reversal signals.