EUR/JPY in 2025: Analysis of the Euro Yen Pair and Investment Opportunities

The euro-yen exchange rate has experienced significant transformations during the first months of 2025, marked by volatility that reflects the changing pulse between the policies of major central banks and global geopolitical tensions. The EUR/JPY pair has fluctuated between 155.6 ¥ and 164.2 ¥, revealing a fascinating dynamic that requires detailed analysis to understand the opportunities and risks ahead.

The Three Pillars Moving EUR/JPY in 2025

The trajectory of the euro-yen quote responds to a combination of interconnected factors that go beyond simple technical oscillations.

Divergent Monetary Cycle

The Bank of Japan raised its official rate from 0.25% to 0.50% in January, marking the most significant turning point for the Japanese currency since 2008. Although the yen strengthened immediately, the gain quickly diluted because European yields maintained substantial advantages. Now, markets expect Tokyo to continue its upward trajectory toward 0.75% in summer and reach 1% by autumn. On the European side, the European Central Bank has implemented three rate cuts (January 30, March 12, and April 17), lowering its deposit facility from 4% to 2.25%. This monetary contraction in the eurozone, driven by economic slowdown and moderate inflation, deepens the yield differential and pressures euro demand. The gap, which was around two percentage points twelve months ago, now converges toward just over one point, eroding the traditional appeal of carry trades denominated in euros.

Global Trade Turbulence

February marked a breaking point when Washington announced a general 10% tariff on all imports and an additional 20% levy on goods from the European Union. This announcement triggered risk aversion and pushed the EUR/JPY pair to its annual low of 155.6 ¥ on February 27. Subsequently, in April, the implementation of these tariffs consolidated the defensive sentiment, although the immediate impact on the euro-yen quote was limited because market participants had already partially priced in these measures. New rounds of trade tensions could reactivate demand for the yen as a safe-haven currency, pushing the pair toward the 158-160 ¥ zone.

Asian Monetary Stimulus

In May, Beijing implemented expansionary measures by lowering its 7-day repo rate to 1.40% and allowing banks to hold fewer reserve requirements. This boost activated risk appetite in Asian markets, diverting capital from defensive assets like the yen. As a result, the Japanese currency retreated and allowed the euro-yen quote to rise rapidly to 164.2 ¥ on May 1. This pattern reveals an uncomfortable truth: EUR/JPY responds more to geopolitical shocks than to short-term rate differentials.

Yen as a Safe-Haven Currency Dynamics

The yen holds a special place in the global financial architecture as a preferred hedge asset during crises. Japan, as a net global creditor with low external debt, projects confidence that attracts capital during turbulence. Additionally, a mechanism known in markets amplifies this dynamic: when the climate is favorable, numerous investors finance themselves in yen at low rates to acquire more profitable assets in other currencies. If the environment deteriorates, these participants liquidate positions, repatriate funds in yen, and pressure demand for the Japanese currency upward. Finally, the depth and liquidity of the yen market position it as the most accessible Asian currency for quick purchases when alarms sound in markets.

Outlook for EUR/JPY until Year-End

Base Scenario: A Wide and Gradually Declining Range

Fundamental analysis suggests that the euro-yen quote will evolve within a broad corridor but with a bearish bias. When markets breathe ease and risk appetite resurges, the euro should maintain support above 165 ¥. When a strong US inflation data emerges, a new round of tariffs or a stock market correction, the yen will regain its safe-haven role, and the pair could retreat toward 158-160 ¥. The central scenario places the euro-yen close to 162 ¥ by year-end, with a slight favorable bias for the yen if the Bank of Japan confirms the continuation of its rate hike cycle in 2026.

Projections from Multiple Analysis Portals

Different methodologies yield varied perspectives:

• LongForecast: range of 165-173 ¥
• CoinCodex: band of 166.08-171.94 ¥
• Traders Union: projection of 165.64 ¥
• Bankinter: band of 160-170 ¥

These divergences reflect inherent uncertainty but converge around 165-170 ¥ as a key resistance zone.

Technical Analysis: Short-Term Exhaustion Signals

The daily EUR/JPY chart maintains a moderate bullish bias but issues warnings about the vigor of the movement. The price trades above the main moving average (approximately 161 ¥), confirming the upward trend in place since early March. However, recent candles show narrow bodies clustered near the upper end of the Bollinger band (max 164.0; average 162.5), indicating fatigue in the buying push. The Bollinger channel has contracted compared to March, a pattern that historically anticipates abrupt movements when the range expands again.

The 14-period RSI stands at 56 after touching 67 last week, signaling an exit from overbought territory and drawing a mild bearish divergence with the May 1 all-time high. This setup reinforces the possibility of a short-term pause or correction.

Critical Technical Levels:

• Immediate support: Bollinger middle band at 162.5 ¥
• Secondary support: confluence of lower band and moving average around 161 ¥
• Break below 161 ¥ would open the door toward 159.8-160 ¥
• Key resistance: 164.2 ¥
• A clear close above 164.2 ¥ would encourage a move toward 166-168 ¥

Historical Perspective of EUR/JPY

Since its inception in 1999, the EUR/JPY pair has embodied the struggle between the euro’s strength as the currency of a powerful economic region and the structural resilience of the yen as a defensive asset. During the 2008 financial crisis, the yen appreciated dramatically while the euro suffered pressures from instability. In the early 2010s, the eurozone debt crisis deepened this gap. However, European economic recovery and the Bank of Japan’s expansive policies in recent years reversed the dynamic, favoring a gradual euro appreciation. Today, with BoJ raising rates and the ECB lowering them, the pair is again navigating toward a balance that favors the yen, reminding us that monetary cycles are cyclical and only predictable in hindsight.

Investment Strategies in EUR/JPY

Short-Term Tactic (3-6 months)

The pair has been oscillating within a 160-170 range since the beginning of the year. Each approach toward the upper zone (165-170 ¥) presents opportunities to sell euros and buy yen, setting a first target at 162 ¥ with a disciplined stop above 171 ¥. The days before BoJ meetings typically generate rapid volatility of one or two yen, an opportunity active traders can exploit with smaller instruments.

Medium-Term Strategy (until end of 2025)

Projections from investment banks converge at 160-170 ¥ by year-end, while more optimistic models place caps at 170-173 ¥. A prudent approach is to accumulate yen in tranches: buy each time the euro-yen quote exceeds 163-164 ¥, averaging entry price and reducing the risk of a single entry. Those needing hedging for euro cash flows can set forwards or deposits in yen near current levels; the cost decreases as the rate differential narrows.

Profit Management

If the pair retreats toward 160-162 ¥ after BoJ hikes expected in summer and autumn, it’s advisable to partially lock in gains, keeping the remainder as protection against geopolitical shocks that have historically favored the yen.

Main Risks to Monitor

• An unexpected pause in the BoJ rate hike cycle if Japanese inflation subsides, or an unexpected rise in European core inflation that halts ECB cuts, could push EUR/JPY back toward the top of the range.
• A prolonged stock rally reactivating carry trades could pressure EUR/JPY toward 167-168 ¥.
• New rounds of tariffs between the US and EU could boost the yen, pushing the pair toward 158-160 ¥.
• Any gesture of trade détente would have the opposite effect, allowing rebounds toward 167-168 ¥.
• It is essential to maintain clear stops and review exposure after each central bank meeting.

Conclusion: Opportunities in a Transition Market

The outlook for the euro-yen quote in 2025 suggests a transitioning market, where the change in monetary cycle rewrites the rules of the game. The Bank of Japan emerges from decades of easy money while the European Central Bank begins its rate reduction, reversing the yield differential that for years favored yen financing. The gap, which was around two points a year ago, converges toward just over one, eliminating the classic carry trade incentive. Additionally, the yen’s safe-haven status during periods of trade tension adds a defensive factor to the scenario.

With the pair bouncing between 160 and 170 ¥, optimal levels for building yen positions are in rebounds toward 165-170 ¥, targeting 160-162 ¥ as objectives and maintaining discipline in risk management around 171 ¥. For the first time in nearly two decades, carry trades are no longer a one-way path, suggesting a downward but gradual trend for EUR/JPY for the remainder of the year. This outlook offers the first clear window in years to build, patiently and prudently, a defensive yen position with a reasonable expectation of moderate revaluation and well-defined risk limits.