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The EUR/JPY currency pair, representing the exchange rate between the Euro and the Japanese Yen, has experienced notable fluctuations over the past few months. This report delves into the recent trends, fundamental factors, technical analysis, and future outlook to provide a comprehensive understanding of the pair's dynamics.

Recent Trends

In early 2025, the EUR/JPY pair exhibited a bullish trend, reaching a peak of approximately 175.41. However, this upward momentum was short-lived, and the pair began a corrective phase, declining to around 154.40 by late February. This decline was influenced by various factors, including monetary policy decisions and economic indicators from both the Eurozone and Japan.

Fundamental Factors

European Central Bank (ECB) Policies

The ECB has been actively adjusting its monetary policies in response to inflationary pressures. In March 2025, the ECB announced an interest rate cut of 25 basis points, bringing the rate to 4.25%. This decision was influenced by the Harmonized Index of Consumer Prices (HICP), which rose to 2.5% in December 2024, primarily due to increased costs in housing, energy, and transportation. The ECB's actions aim to balance inflation control with economic growth, impacting the Euro's valuation.

Bank of Japan (BOJ) Policies

Conversely, the BOJ has maintained a more conservative approach. Despite Japan's inflation reaching a two-year high of 4%, the BOJ has refrained from significant rate hikes. In March 2025, the BOJ kept its policy rate unchanged, with market expectations for a 25 basis point hike standing at only 1.8%. This cautious stance has contributed to the Yen's relative strength against the Euro.

Technical Analysis

Support and Resistance Levels

Technical indicators suggest that the EUR/JPY pair is navigating key support and resistance levels. The pair found support around 154.40, a critical level that, if breached, could signal a continuation of the downtrend. Resistance is observed near 161.17, with a sustained break above this level potentially indicating a reversal to the upside.

Moving Averages and Indicators

As of mid-March 2025, the pair was trading below its short-term moving averages, including the 9-day EMA and 20-day SMA, indicating bearish momentum. The Relative Strength Index (RSI) hovered around 40, approaching oversold territory, while the MACD line remained below its signal line, reinforcing the bearish outlook.

Future Outlook

Short-Term Forecasts

Analysts project a modest decline in the EUR/JPY exchange rate over the next three months. Forecasts suggest the pair may trade around 160.30 by Q2 2025, approximately 1.04% lower than current levels. This projection reflects expectations of continued monetary policy divergence between the ECB and BOJ.

Long-Term Projections

Long-term forecasts present a more varied outlook. Some analysts anticipate a bullish trend, with the pair potentially reaching between 173.93 and 186.39 by the end of 2025. Others predict a more conservative range, estimating the pair to trade between 182 and 204 during the same period. These projections are contingent on factors such as economic growth, inflation rates, and central bank policies in both regions.

Conclusion

The EUR/JPY currency pair's recent performance underscores the complex interplay between monetary policies, economic indicators, and technical factors. While short-term forecasts suggest a slight decline, long-term projections vary, reflecting uncertainties in global economic conditions. Traders and investors should closely monitor developments from the ECB and BOJ, as well as key economic data releases, to make informed decisions regarding the EUR/JPY pair.