- EUR/JPY drifts higher to around 175.65 in Monday’s early European session.
- A positive view of the cross prevails above the 100-day EMA, with the bullish RSI indicator.
- The immediate resistance level is seen in the 176.90-177.00 region; the first support level to watch is 174.82.
The EUR/JPY cross edges higher to near 175.65 during the early European session on Monday. The Japanese Yen (JPY) softens against the Euro (EUR) as the dovish Sanae Takaichi is poised to become the first female Prime Minister. The German September Producer Price Index (PPI) report will be published later on Monday.
The Liberal Democratic Party (LDP) is teaming up with the Japan Innovation Party (JIP), and the market’s betting this alliance will keep Japan’s easy-money policies alive. A parliamentary vote to choose a prime minister is set for Tuesday. Sanae Takaichi is expected to become Japan’s next Prime Minister, raising market expectations for big spending and loose monetary policy. Traders anticipate that the Bank of Japan (BoJ) would further delay raising interest rates, which would drag the JPY lower and act as a tailwind for the cross.
Technically, the constructive outlook of EUR/JPY remains in place, with the price being well-supported above the key 100-day Exponential Moving Average (EMA) on the daily chart. The upward momentum is reinforced by the 14-day Relative Strength Index, which stands above the midline near 56.85. This suggests that further upside looks favorable in the near term.
On the bright side, the first upside barrier emerges in the 176.90-177.00 zone, representing the high of October 13 and the psychological level. Sustained trading above this level could pick up more momentum and aim for 178.00, a round figure. Further north, the next resistance level is seen at 178.50.
On the downside, the initial support level for EUR/JPY is located at 174.82, the low of October 17. Any follow-through selling below this level could see a drop to 172.35, the lower limit of the Bollinger Band. The additional downside filter to watch is 171.25, the 100-day EMA.
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