EUR/JPY posted a second straight day of gains, changing hands near 184.90 in Asian trade on Monday. The cross is consolidating above its nine-day and 50-day Exponential Moving Averages (EMAs), clustered in the mid-184s, which frames a nearby demand zone. Momentum indicators are steady: the 14-day Relative Strength Index (RSI) is sitting close to 50, pointing to neutral conditions that could still accommodate further upside while those trend measures hold.
Even so, the daily chart keeps the pair within a descending channel, leaving the broader technical bias tilted to the downside despite the recent bounce. Resistance is seen around 185.10 at the channel’s upper boundary, and a move beyond it would open the way towards the record high at 187.95 set on April 17. On the downside, support is located at the 50-day EMA of 184.85 and then the nine-day EMA at 184.79; a break beneath both would bring the three-month low of 181.87 from March 16 into view, followed by the five-month low of 180.81 marked on February 12.
Technical Decision Point Near Key Levels
Given the EUR/JPY is trading around 184.90, we are at a critical decision point. The pair shows some immediate strength by holding above key moving averages, but it remains trapped within a broader descending channel. This suggests a conflict between short-term buying pressure and a more persistent downtrend.
We are watching the 185.10 level, which marks the top of this channel, as the primary trigger for a bullish play. Recent inflation data from the Eurozone surprised slightly to the upside last week, coming in at 2.6% for April, which might give the euro a short-term boost. If we see a daily close above 185.10, we will consider buying call options targeting the April high near 187.95.
Trading Strategy and Volatility Outlook
Conversely, failure to break that resistance, followed by a slip below the 184.79 support level, would confirm the downtrend’s continuation. The Bank of Japan’s minutes from its May meeting showed a growing discussion about accelerating policy normalization, which could strengthen the yen in the coming weeks. A break below support would lead us to purchase put options, with an initial target around the March low of 181.87.
The Relative Strength Index is sitting near 50, indicating a lack of strong momentum in either direction right now. Implied volatility for one-month EUR/JPY options has settled around 8.5%, reflecting this indecision in the market. Therefore, we are maintaining smaller position sizes until a decisive break of either the channel resistance or the moving average support occurs.
