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17 June 2025,07:14

Daily Market Analysis

Japanese Yen Drifts Lower Ahead of BoJ Policy Decision

17 June 2025, 07:14

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 Key Takeaways:

*The Japanese Yen eased in strength ahead of the BoJ interest rate decision. 

*Yen traders may have eyes on the development of the Middle East tension to gauge the Yen’s strength. 

Market Summary:

The Japanese yen continued to edge lower as markets look ahead to the Bank of Japan’s interest rate decision, with policymakers widely expected to maintain their current policy stance. The BoJ’s cautious posture is shaped by persistent global uncertainties—ranging from renewed U.S. tariff threats under former President Trump to escalating tensions in the Middle East.

Years of ultra-loose monetary policy have left global financial markets heavily reliant on Japanese liquidity, and any abrupt tightening could risk destabilizing capital flows. Domestically, tepid earnings growth and a lack of compelling inflationary pressure further justify the BoJ’s measured approach.

In the short term, this policy inertia may keep the yen under pressure. However, should geopolitical risks intensify—particularly in the Middle East—the yen could see renewed demand as investors pivot to traditional safe-haven assets.

The yen’s direction remains highly sensitive to geopolitical developments and BoJ signals. A dovish hold is likely priced in, but an unexpected hawkish tilt or a flare-up in global risk aversion could alter the currency’s trajectory swiftly.

Technical Analysis

EURJPY, D1

The EURJPY pair surged nearly 2% after decisively breaking above its key range-bound resistance at the 164.80 level, signaling a strong bullish bias. The breakout propelled the pair to its highest level since August, with momentum now targeting the next key resistance at 168.75.

Despite the bullish trajectory, the pace of the recent rally raises the likelihood of a near-term technical retracement. The Relative Strength Index (RSI) has entered overbought territory, while the MACD remains firmly above the zero line and is diverging higher—both pointing to strengthening bullish momentum, but also flashing potential for short-term exhaustion.

While the broader trend remains constructive, traders may watch for consolidation or pullbacks before the pair attempts to clear the next resistance threshold. A sustained break above 168.75 would likely reinforce the bullish trend, while failure to hold gains could open the door to a corrective phase.

Resistance Levels: 168.75, 172.70
Support Levels:  164.66, 161.20

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