EUR/JPY fell after two days of gains and traded near 186.40 in European hours on Tuesday. The daily chart shows it has moved below an ascending channel, which may point to a bearish reversal.
The cross is still above the 50-day EMA at 185.00, which keeps the near-term bias mildly bullish. It is also trading just below the nine-day EMA at 186.66, which is acting as near-term resistance.
Technical Picture And Key Levels
The 14-day RSI is near 53, which suggests positive momentum that is not overstretched. This implies pullbacks towards moving averages may continue while the wider uptrend holds.
If EUR/JPY rebounds towards 186.66 near the channel’s lower boundary, it may retest the all-time high of 187.95 set on 17 April. A move above 187.95 could open the way towards the channel’s upper boundary around 189.80.
If it weakens, the next level to watch is support at the 50-day EMA at 185.00. The analysis was produced with the help of an AI tool.
The EUR/JPY cross is sitting at a pivotal point around 186.40, having slipped just below its recent ascending channel. This signals caution, as the immediate trend has been broken, suggesting a potential shift in momentum. The Relative Strength Index near 53 indicates the market is balanced, which means a decisive move could be brewing in either direction.
Options Strategy Considerations
For those leaning bearish, the fundamental picture offers support. Recent data showed Eurozone inflation cooled to 2.4% last month, increasing bets that the European Central Bank will cut rates in June. This potential policy divergence with a more neutral Bank of Japan could pressure the cross, making put options targeting the 185.00 support level an interesting strategy.
However, the uptrend is not officially over as long as we hold above the 50-day average. A move back above 186.66 would invalidate the bearish signal and could be a trigger for traders to position for a retest of the 187.95 high. In this scenario, short-dated call options could provide a way to play the upside momentum.
We also have to consider the risk of intervention from Japanese authorities, which has been a recurring theme. We saw the Ministry of Finance step in to strengthen the yen back in late 2024, and with the currency weak across the board again, the risk of sudden, sharp moves is elevated. This environment makes volatility plays, such as straddles, appealing for those who anticipate a big price swing but are unsure of the direction.
Given the conflicting technical and fundamental signals, traders could use options to define their risk. A break and hold below 186.00 might signal it’s time to favor bearish positions, while a firm reclaim of 186.66 would put the bulls back in control. Until one of these levels gives way, the market remains in a state of indecision.
