The EUR/JPY currency pair traded in negative territory near 178.50 during early European hours on Wednesday, reflecting a bearish bias despite an oversold Relative Strength Index (RSI) of around 22, which signals deep selling pressure but also potential fatigue if sellers do not push prices lower [1]. The Japanese Yen strengthened against the Euro following a series of hawkish comments from Bank of Japan (BoJ) policymakers, notably board member Hajime Takata, who indicated that the central bank could adopt a more aggressive stance than previously expected. Takata stated that a 25-basis-point hike 'is not necessarily set in stone,' and suggested that back-to-back rate hikes are possible. The BoJ is expected to raise its policy rate to 1.25% from the current 1.0% at its September meeting, marking the highest level in approximately 31 years and following a rate hike in June [1].
Strategists at Rabobank highlighted concerns about the Yen's role as a funding currency, noting that rising Japanese Government Bond (JGB) yields are unsettling cross-border flows. They questioned whether the recent rapid unwind of JPY shorts could accelerate in the near term, and warned that an appreciating Yen could reduce domestic Japanese investors' incentive to seek opportunities abroad. This debate has intensified due to the rise in JGB yields, which has already become a topical issue. Rabobank also pointed out market suspicions that the US Treasury is worried about large Japanese insurers potentially selling US government debt in favor of JGBs, underscoring how shifts in Japan's rate environment could impact global fixed income positioning [1].
From a technical perspective, EUR/JPY remains decisively below key moving averages, including the 20-day simple moving average (middle Bollinger band) and the 100-day simple moving average, reinforcing a bearish near-term outlook. Initial resistance is seen at the lower Bollinger band near 179.00, with further resistance at the 180.00 psychological level, the Bollinger mid-line at 183.82, and the 100-day SMA at 184.70. On the downside, the November 10, 2025 low of 177.17 serves as initial support, and any sustained selling below this level could open the door to further declines [1].
CONCLUSION
EUR/JPY is under significant downward pressure as hawkish signals from the BoJ drive Yen strength and raise questions about global fixed income flows. Technical indicators suggest the bearish trend may persist unless buyers reclaim key resistance levels. The market is closely watching the BoJ's September policy meeting and its potential ripple effects across global asset allocations.