Japanese Yen Technical Analysis: USD/JPY, EUR/JPY, GBP/JPY – July 21, 2025
Original author: David Song | Source: Forex.com
The Japanese yen continues to exhibit considerable weakness across multiple currency pairs as the Bank of Japan (BoJ) maintains its ultra-loose monetary policy. Technical indicators point toward a potential continuation of this trend, particularly against the US Dollar (USD), Euro (EUR), and British Pound (GBP). This technical outlook will explore the charts of USD/JPY, EUR/JPY, and GBP/JPY along with key price levels, patterns, and indicators that traders should monitor.
Market Overview and the Role of Central Bank Policy
The Japanese yen has been on the defensive for much of 2025. The Bank of Japan remains the only major central bank refusing to initiate a rate-hiking cycle, citing ongoing concerns about deflation and stagnant wage growth. In contrast, the US Federal Reserve, the European Central Bank (ECB), and the Bank of England (BoE) have either continued tightening monetary conditions or maintained restrictive policies to control inflation. This fundamental divergence has led to a significant depreciation of the yen, making it one of the worst-performing G10 currencies this year.
BoJ Governor Kazuo Ueda recently reemphasized the institution’s commitment to supporting economic growth over containing inflation, which has helped fuel yen weakness, particularly in the face of rising global bond yields. Meanwhile, Japanese government bond (JGB) yields remain capped due to yield curve control policies, further widening rate differentials between Japan and its global peers.
USD/JPY Technical Outlook
The USD/JPY pair recently reached its highest level since 1986, following a sharp breakout above the 160.00 psychological level. Traders have closely watched this level as a potential zone where Japanese authorities might intervene, yet no official actions have been taken so far.
Key Observations:
– Price Action: USD/JPY closed above 160.00, confirming a bullish breakout from a consolidation range that had persisted since late May.
– Trend: The long-term trend remains strongly bullish with higher highs and higher lows in place since the start of the year.
– Indicators:
– RSI (Relative Strength Index) remains in overbought territory above 70, highlighting potential caution for new longs but confirming strong momentum.
– MACD (Moving Average Convergence Divergence) maintains a wide bullish divergence, further supporting upside continuation.
– Support Levels:
– Initial support lies around 158.50, corresponding with a recent breakout structure.
– Further support seen near 155.80, where the 50-day exponential moving average (EMA) aligns with historical demand zones.
– Resistance Levels:
– Immediate resistance is negligible above the 160.00 mark due to the pair entering multi-decade highs.
– Traders might consider Fibonacci extension targets: 163.50 (161.8% extension) and 167.85 (261.8% extension from the latest major swing).
– Chart Pattern: Possible formation of a bullish flag or continuation pattern forming on the intraday chart, suggesting the next leg higher could be underway.
Fundamental Drivers to Watch:
– US economic data releases, particularly inflation and labor market numbers, could dictate Fed rate expectations and further fuel or dampen USD strength.
– Any hints of intervention from Japanese monetary authorities, although unlikely unless extreme volatility is witnessed.
EUR/JPY Technical Outlook
EUR/JPY has also maintained a strong upward trajectory, breaching key resistance levels and pushing beyond the 175.00 threshold for the first time in its history. The pair’s performance is consistent with stronger euro fundamentals and relentless yen weakness.
Key Observations:
– Price Action: EUR/JPY has broken above the 172.00 resistance, which had been in place since May, and shows signs of establishing a new rising channel.
– Trend: Sustained bullish momentum supported by favorable interest rate differentials between the ECB and BoJ
Explore this further here: USD/JPY trading.