• EUR/JPY may find initial support at the 12-month low of 175.07.
• The 14-day Relative Strength Index is at 45.73, indicating subdued bullish momentum.
• The immediate barrier lies at the nine-day EMA of 176.91.

EUR/JPY loses ground for the second consecutive day, trading around 176.80 during Asian hours on Friday. The technical analysis of the daily chart suggests that the currency cross is remaining within a descending channel pattern, indicating a prevailing bearish bias.

The EUR/JPY cross is keeping a bearish near-term tone as it holds below both the nine- and 50-day Exponential Moving Averages (EMAs). The short- and medium-term EMAs above price suggest rallies remain capped for now, while the 14-day Relative Strength Index (RSI) at 45.73 stays below the neutral 50 line, hinting at subdued bullish momentum rather than outright oversold conditions.

The EUR/JPY cross may fall toward the initial support at the 12-month low of 175.07, reached on October 30, followed by the lower boundary of its descending channel around 174.00. A break below the channel would open the door for the currency cross to navigate the region around the 15-month low at 169.72.

On the upside, the EUR/JPY cross may rebound and test the immediate barrier at the nine-day EMA of 176.91, followed by the upper boundary of the descending channel near the 50-day EMA of 178.59. A successful break above the medium-term price average would cause a bullish reversal, supporting the EUR/JPY cross to explore the area around the all-time high of 187.95, reached on April 17.

Yen still weighed down by structural outflows despite distorted rate signals

Analysts at MUFG/BTMU note that recent official action has complicated the usual relationship between the Yen and interest rate differentials, with “intervention in last July / early August” having “distorted the link with rates.” However, they stress that the underlying message from the currency’s behaviour is clear: “what the movement of the yen does indicate is that there are still some structural flows that continue to weigh on yen performance and those flows could well be slow to change.” This suggests that, even as rate dynamics evolve, persistent portfolio and FDI outflows remain a key drag on JPY, and are unlikely to reverse quickly.