EUR/JPY, GBP/JPY Technical Forecast: Yen Crosses Look Poised for Bullish Breakouts

EUR/JPY, GBP/JPY Key Points

Markets have already priced in the current projected path of interest rates from the ECB, BOE, and BOJ, so the main market driver moving forward will be how those expectations evolve.
EUR/JPY’s coiling price action just below resistance could set the stage for a breakout above 164.00 to the highest level since July.
GBP/JPY’s consistent series of “higher lows” suggests that buying pressure is growing beneath that horizontal resistance level.

From a basic fundamental perspective, the argument for potential weakness in crosses like EUR/JPY and GBP/JPY is fairly straightforward: Both the European Central Bank and the Bank of England are likely to cut interest rates in the coming months, whereas the Bank of Japan is one of the few major central banks considering interest rate hikes.

As ever though, markets have already priced in the current projected path of interest rates, so the main market driver moving forward will be how those expectations evolve. From that perspective, traders have been reducing their bets on meaningful interest rate hikes out of Japan looking out into 2025, leading to widespread yen weakness against most of its rivals over the last month. Against that backdrop, the technical setups on EUR/JPY and GBP/JPY could be particularly interesting for bulls to monitor.

Japanese Yen Technical Analysis – EUR/JPY Daily Chart

Source: TradingView, StoneX

Looking first at EUR/JPY, the pair is consolidating near the top of its 2.5-month range between 155.00 and 164.00. Rates have regained the 50-day EMA, and last week’s coiling price action just below resistance could set the stage for a breakout above 164.00 to the highest level since July. In that scenario, EUR/JPY bulls would look to target the 50% and 61.8% Fibonacci retracement of the July swoon near 165.00 and 167.40 next. On the other hand, a break below the 50-day EMA near 162.00 would tip the scales toward a reversion to the middle of the range around 160.00 or lower.

Japanese Yen Technical Analysis – GBP/JPY Daily Chart

Source: TradingView, StoneX

Turning our attention to GBP/JPY, the chart and interpretation are similar. In its case, GBP/JPY has already retraced more than 50% of the July drop, and the notoriously-volatile pair is carving out a large ascending triangle pattern just below the 196.00 handle. The consistent series of “higher lows” suggests that buying pressure is growing beneath that horizontal resistance level, potentially setting the stage for a big bullish breakout in the next couple of days.

Above the triangle pattern, bulls will look to target 197.40, 200.00, and 202.15 as the next logical targets, whereas a bearish breakdown could expose the 50-day EMA at 192.30 next.

-- Written by Matt Weller, Global Head of Research

Check out Matt’s Daily Market Update videos on YouTube and be sure to follow Matt on Twitter: @MWellerFX

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.