• EUR/JPY could find initial support at the lower boundary of the channel around 176.60.
• The 14-day Relative Strength Index is at 29.78, signaling potential seller exhaustion and eventual stabilization.
• The primary resistance lies at the nine-day EMA at 178.18.

EUR/JPY halts its seven-day losing streak, trading around 177.40 during Asian hours on Tuesday. Technical analysis of the daily chart shows that the currency cross is remaining close to the lower boundary of the descending channel, suggesting the price holds support and a temporary bounce. However, a break below the channel would signal accelerating downward momentum in a steeper downtrend.

The EUR/JPY cross is maintaining a bearish tone as it holds beneath both the nine- and 50-period Exponential Moving Averages (EMAs). The currency cross has recently slipped below the nearer structural floor at 175.70, turning recent price action into a corrective phase, while the 14-day Relative Strength Index (RSI) at 29.78 hovers in oversold territory, hinting that while downside pressure is strong, fresh selling could become more measured in the short term.

The initial support lies at the lower boundary of the channel around 176.60, followed by an 11-month low of 175.70, recorded in November 2025. Further support lies at the 14-month low of 169.72.

On the upside, the EUR/JPY cross may rebound and test the nine-day EMA at 178.18, followed by the 50-day EMA at 181.20. Further resistance lies at the upper boundary of the descending channel around 184.20, followed by the all-time high of 187.95 set on April 17.

ECB tone softens as Lagarde flags growth risks from rising yields

Analysts at Commerzbank argue that the ECB has scope to ease market tensions through communication before resorting to more forceful tools. They note that, despite elevated inflation, ECB representatives could “adopt a less hawkish tone in their public comments, thereby dampening expectations of interest-rate hikes and easing pressure on government bonds.” In their view, Christine Lagarde’s recent appearance before the European Parliament’s Committee on Economic and Monetary Affairs already points in this direction, as she stressed that “the sharp rise in bond yields would dampen economic growth and limit the pass-through of higher energy costs to consumers,” signalling greater sensitivity to the impact of tighter financing conditions.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

U.S. Dollar Index gains ground as traders react to ISM Services PMI report. The report showed that ISM Services PMI declined from 55.4 in August to 54.9 in September, compared to analyst forecast of 55. Numbers above 50 show expansion. The weaker-than-expected report did not put any pressure on the American currency.

Currently, U.S. Dollar Index is trying to settle above the resistance level at 102.35 – 102.50. In case U.S. Dollar Index manages to settle above the 102.50 level, it will head towards the next resistance, which is located in the 103.35 – 103.50 range.

– Written by


James Fuller

STORY LINK EUR/USD Forecast: Analysts Slash 12-Month Target to 1.12

The Euro to Dollar exchange rate (EUR/USD) traded near 1.1204 on Monday afternoon, down around 0.4% as concerns over French government finances weighed on the single currency.

Weaker US employment figures have failed to produce a lasting Euro recovery, with ING warning of further losses and Rabobank cutting its forecasts despite the softer American data.

EUR/USD Forecasts: ING warns of 1.10 risk

ING expects EUR/USD to retreat towards 1.1100-1.1120 in the near term, with French fiscal uncertainty threatening a deeper decline.

According to ING; “We stick with our 1.1100/1120 EUR/USD target for the time being, with the risk of an extension to the 1.10 area.”

EUR/USD has slipped further from Friday’s close near 1.1252, extending the pressure that drove a 2.5% decline during September.

ING noted that markets have removed around 30 basis points of expected European Central Bank tightening since late September, compared with only 13 basis points for the Federal Reserve.

The smaller adjustment to US expectations has preserved a source of support for the Dollar.

Rabobank has also become more cautious, lowering its three-month EUR/USD forecast to 1.13 from 1.16 and its 12-month projection to 1.12 from 1.18.

The bank commented; “We have revised our EUR forecasts lower across the board”.

The revised targets are close to current levels, but represent a substantial retreat from its previous expectations of a stronger Euro.

Rabobank warned that investors selling French bonds may increasingly move funds outside the Eurozone rather than switch into other Euro-denominated assets.

It added; “This raises the prospect that the EUR could be impacted by outflows.”

French public debt reached 119.0% of GDP in the second quarter, up from 117.5% during the opening three months of the year.

US economic developments nevertheless remain an important counterweight to the Euro’s domestic difficulties.

Non-farm payrolls increased by just 29,000 in September, while revisions removed 60,000 jobs from the previous two months and unemployment increased to 4.2%.

Annual wage growth also eased to 3.0%, providing further evidence that labour-market inflation pressures are cooling.

ING said “the Fed leadership is clearly leaning in the direction of an October hold”, although it still expects another increase later this year.

It added; “December remains our call on the next Fed hike.”

Deutsche Bank’s analysis published last week offered a more constructive outlook, forecasting EUR/USD at 1.17 by the end of 2026.

The bank believes resilient growth outside the US, an eventual easing of energy pressures and already substantial expectations of Fed tightening should limit sustained Dollar gains.

According to Deutsche Bank; “This global growth environment is not consistent with US exceptionalism.”

The forecast is under pressure following the latest decline, but the bank argued that conditions did not justify assuming the Dollar’s advance would continue.

“This is the wrong time to be chasing EUR/USD lower,” the analysts added.

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The Japanese yen has become an important variable for currency markets in 2026, particularly after Japan returned to direct foreign exchange intervention. For traders studying the GBPJPY forecast, intervention risk matters because official yen buying can create sudden moves even when broader interest rate trends point in another direction. The key question is how intervention expectations interact with Bank of Japan policy, British monetary policy, positioning, and risk sentiment.

Why Yen Intervention Matters for GBP/JPY

Foreign exchange intervention is designed to influence currency conditions, usually by buying or selling a currency in the market. When authorities buy yen, the immediate effect can be yen appreciation. Because GBP/JPY expresses the value of one pound in yen, stronger yen conditions can place downward pressure on the pair.

This makes intervention a major risk factor even though GBP/JPY is not the direct target of Japanese authorities. An intervention focused on dollar-yen can spread quickly across yen crosses as traders adjust positions. A sharp yen rally can therefore push GBP/JPY lower, potentially changing short-term technical structures and market expectations.

2026 Has Already Changed the Intervention Landscape

Japan’s intervention activity has made this risk more concrete in 2026. The Ministry of Finance stated that Japan purchased yen in coordination with the United States on July 31, describing the action as a response to excessive volatility and disorderly yen movements. The ministry also said it would not hesitate to conduct further joint intervention.

Reuters reported that Japan’s foreign exchange intervention between July 30 and August 26 reached 15.4 trillion yen, the largest intervention operation recorded in a single month. The yen initially strengthened sharply, although some of that move later reversed. These developments show why intervention is a practical risk when assessing yen crosses.

The Possibility of Surprise Intervention

One of the most important developments for 2026 is the possibility that Japanese authorities could avoid identifying a specific exchange rate level before acting. Reuters reported in July that Japan was considering a more unexpected approach intended to make speculative yen selling more difficult.

For GBP/JPY traders, this increases uncertainty. If intervention is no longer preceded by obvious warnings or a predictable threshold, positioning around technical resistance becomes more complicated. A pair can remain supported by carry-trade dynamics and still experience a sudden decline if yen buying begins.

Bank of Japan Policy Adds Another Layer

Intervention is only one part of the yen outlook. The Bank of Japan’s monetary policy also matters because higher Japanese interest rates can make yen-denominated assets relatively more attractive and reduce the incentive for some carry trades.

2026 developments have strengthened this connection. The Bank of Japan changed its monetary policy guidance in September, while market attention remained focused on the future path of rate increases. Reuters reported that the yen’s September rally had been strengthened by expectations for a more hawkish policy direction, although uncertainty remained over how quickly the central bank would continue tightening.

For GBP/JPY, this creates two sources of yen strength. A policy-driven yen rise can reinforce an intervention-driven move, making downward pressure on the pair more pronounced.

The UK Rate Outlook Still Matters

Intervention risk does not operate independently of the British pound. GBP/JPY reflects two economies, so developments in the United Kingdom remain important. If expectations for UK interest rates increase while Japanese policy stays comparatively cautious, the pound can receive support against the yen.

The opposite can also occur. If UK economic data weakens or expectations for further Bank of England tightening fade while Japanese rate expectations rise, the interest rate differential can move against the pound. In that environment, intervention risk could amplify an existing downward trend rather than create it from nothing.

Technical Levels Could Become More Important

Technical levels can become especially important during policy-sensitive periods because sudden yen buying may create sharp movements in GBP/JPY. Support and resistance zones can help identify areas where buying or selling pressure has previously appeared. A strong intervention move could push the pair below an established support level, while reduced intervention concerns and renewed carry-trade demand could support a recovery.

Moving averages and oscillators can also help assess whether market momentum is strengthening or weakening. However, technical indicators cannot anticipate unexpected intervention decisions. Instead, they can provide useful context for understanding existing price trends, momentum, and potential reactions when Japanese authorities enter the currency market.

Market Positioning and Risk Sentiment

Positioning is another important variable. When traders accumulate large short-yen positions, the market can become vulnerable to a rapid reversal. Intervention can force traders to close positions, creating additional yen demand and accelerating the move.

Risk sentiment also matters because the yen can respond to changes in global market confidence. A shift toward risk aversion may encourage investors to reduce leveraged positions and reconsider carry trades. For GBP/JPY, this can compound pressure created by Japanese policy actions.

What Could Shape GBP/JPY Through Late 2026?

Several developments deserve attention in late 2026. First, traders may watch Japanese government communication for signs that authorities consider yen movements excessive or disorderly. Second, Bank of Japan decisions and guidance will remain important for expectations about future rates. Third, UK inflation, growth, employment, and Bank of England communication can change the relative appeal of sterling.

The relationship between these factors matters more than any single headline. Intervention may produce a sharp short-term reaction, but sustained GBP/JPY direction can still depend on interest rate differentials and economic fundamentals.

Conclusion

Yen intervention risks can influence the GBPJPY forecast in 2026 because Japanese yen buying can transmit quickly into other yen crosses. The risk has become more significant after Japan’s intervention activity this year, while changing Bank of Japan policy expectations provide another potential source of yen strength. For GBP/JPY analysis, traders therefore need to monitor communication, intervention activity, Japanese and UK monetary policy, economic data, positioning, and technical levels together. This framework can explain why the pair may experience abrupt moves even when longer-term fundamentals appear stable.

The 2-year rate in the United States continues to be something I watch for signs of trouble. Ultimately, this is a market that shows that we still have quite a bit of stress out there, although it is fairly quiet today on Monday. Nonetheless, elevated rates do cause some issues for various risk appetite-based assets out there and are something that you need to be watching.