EUR/JPY Cross Dynamics and Trend Continuation Potential: Technical Analysis and Strategic Entry Points

The EUR/JPY cross has emerged as one of the most compelling opportunities in the forex market in 2025, driven by a robust uptrend and a favorable macroeconomic backdrop. However, recent price action has introduced complexities, with a potential double-top correction pattern raising questions about the sustainability of the bullish momentum. This analysis synthesizes technical and macroeconomic insights to evaluate the cross's trajectory and identify strategic entry points for traders seeking to capitalize on its long-term potential.

Technical Analysis: A Strong Uptrend and Double-Top Correction

The EUR/JPY pair has surged to multi-decade highs, with buyers demonstrating resilience amid a weakening Japanese yen and a strengthening euro. Yet, recent price behavior suggests a possible correction. According to a report by Forex.com, the pair has formed a double-top pattern, a bearish reversal signal characterized by two attempts to break above a key resistance level followed by a pullback. This pattern is reinforced by the RSI (14) showing divergence from price action at overbought levels-a phenomenon last observed in 2007, which historically preceded corrections according to Forex.com.

The psychological threshold of 180.00 has become a critical focal point. Forex.com notes that this level could trigger profit-taking or a pullback, mirroring the dynamics observed at the 175.00 level earlier in the year. Traders should monitor whether the pair can hold above 178.07, a Fibonacci extension level that has acted as a short-term support zone according to Forex.com. A breakdown below this level could validate the double-top pattern and open the door to a test of the 177.00-177.24 support range according to Forex.com.

Strategic Entry Points for Bullish Positioning

Despite the near-term risks, the technical structure of EUR/JPY remains bullish. Forex.com highlights multiple support zones that could serve as entry points for buyers if the cross experiences a correction. These include:
- 178.57-178.82: A key area where buyers have historically intervened to push the pair higher.
- 177.86-178.07: A secondary support zone that could attract aggressive buyers if the pullback accelerates.
- 177.00-177.24: A critical psychological level that, if held, would reinforce the long-term uptrend according to Forex.com.

For shorter-term traders, the 175.43 level has proven resilient, with buyers rallying the pair to 178.07 after a bounce. Further support is expected at 176.25-176.48, while the 178.07 Fibonacci extension remains a key resistance target according to Forex.com.

Macroeconomic Backdrop: A Tailwind for the Uptrend

The macroeconomic fundamentals underpinning EUR/JPY remain firmly bullish. The Japanese yen's weakness persists as the Bank of Japan (BOJ) continues to lag in rate hikes, constrained by its commitment to ultra-easy monetary policy. In contrast, the European Central Bank (ECB) has already initiated rate cuts, creating a widening interest rate differential that favors the euro according to Forex.com. This divergence in monetary policy trajectories is likely to sustain the cross's upward momentum, particularly as the yen remains vulnerable to external pressures.

Conclusion: Balancing Technical Caution and Long-Term Optimism

While the double-top pattern and RSI divergence signal a potential near-term correction, the EUR/JPY cross's technical and macroeconomic foundations remain intact. Traders should treat pullbacks to key support zones as opportunities to initiate or add to bullish positions, provided the 177.00-177.24 level holds. However, vigilance is warranted, as a breakdown below this range could invalidate the uptrend and expose the pair to a retest of the 175.00 level. For now, the cross remains a compelling case of a market where technical caution coexists with long-term optimism.