Bearish reversal signals warned momentum may be vulnerable, yet bulls stepped back in across the yen crosses. Whether that resilience holds may soon be tested.
- Yen crosses sending mixed technical signals
- AUD/JPY remains the cleaner bullish setup
- EUR/JPY stabilising, GBP/JPY heavy despite holding uptrend
- Left tail risks loom large
Summary
The technical picture across the crosses remains uneven. continues to look constructive, is stabilising, while still looks heavy despite holding key support. With risk appetite again playing an influential role alongside looming event risks, conviction behind the dip-buying mindset may soon be tested.
Uptrends Intact, Conviction Uneven
While last week’s warned that directional risks may be shifting across the yen crosses, but those risks have yet to materialise. When tested, bulls stepped back in to defend the long-running uptrends, clearly visible in EUR/JPY, AUD/JPY and GBP/JPY charts below.
The rebound has been particularly notable in GBP/JPY, with the pair pushing higher despite growing risks the Bank of England may be forced to cut rates next month following soft jobs and data. Under normal circumstances, that shift in expectations would matter more.
More broadly, the recovery has coincided with a revival in risk appetite, reinforcing the view that volatility, risk sentiment and broader asset price performance are exerting greater influence on yen behaviour than interest rate differentials.
When that backdrop is overlaid against the daily technical picture for these pairs, it becomes easier to see why buying the dip remains the preferred approach. Until there is a definitive breakdown to challenge the broader bullish trend, the path of least resistance still appears skewed to the upside.
However, while AUD/JPY continues to look constructive for longs, particularly following another strong Australian jobs report released earlier today, the picture is not quite as convincing for the European crosses. Despite bullish trends remaining intact, recent price action has been far less convincing.
GBP/JPY: Bounce Lacks Conviction
Source: TradingView
GBP/JPY has struggled to produce a meaningful bounce after testing the intersection of horizontal and uptrend support at 207.35 earlier this week. While the support zone held, price has so far been unable to reclaim the 209.65 low set on January 26.
That remains the key near-term level for bulls to overcome to restore confidence in the sustainability of the broader trend, opening the door for a run towards the 50DMA and 212 resistance initially.
While RSI (14) has produced two higher lows, it continues to track below the neutral 50 level, with the overall slope suggesting only a gradual dissipation of downside pressure. MACD also continues to generate a bearish signal, even if it is beginning to show tentative signs of curling back towards the signal line.
Taken together, the broader message does not scream buy dips. Quite the opposite. Price action still carries a heavy tone, pointing to the risk of another retest of uptrend support before long. Should that level give way, particularly on a closing basis, there is little standing in the way of a deeper unwind towards the 200DMA.
EUR/JPY: Outlook Brightening
Source: TradingView
EUR/JPY looks far better than GBP/JPY, that’s for sure. The bounce off uptrend support has been far more convincing, with price recovering 182.00, a level that had capped rallies frequently up until the last two days.
To start thinking about a potential retest of the early January high of 186.91, the pair needs to reclaim the 50DMA and 184.00, the latter a level that has acted as both support and resistance lately. With a string of lower highs and lower lows recorded over the past six weeks, a break above 184 may help to snap that sequence, putting a retest of the February high on the table.
With RSI (14) now trending higher and back in neutral territory, immediate downside risks appear to be ebbing, particularly with MACD clearly curling back towards the signal line. It feels like directional risks may be in the early stages of shifting higher.
Of course, should the brightening picture darken suddenly, the risk of a definitive breakdown through uptrend support cannot be ruled out. In that scenario, minor levels such as 180.00 and 178.83 would come into focus, strengthening the case for a more meaningful trend shift.
AUD/JPY: Dip Buyers Regain Control
Source: TradingView
AUD/JPY threatened to break trend support earlier this week, a level dating back to the October lows, but bulls stepped in when required. The pair has bounced strongly in recent days, moving back towards minor overhead resistance at 109.66.
If price were to reclaim that level, bulls would be eyeing a return to the February high of 110.80 and a resumption of the broader bullish trend. There is little in the current structure to deter dip-buying behaviour.
Price remains in a well-defined uptrend, sitting above both the 50 and 200-day moving averages, which continue to slope higher. Momentum indicators also lean supportive, with RSI (14) and MACD suggesting upside strength may be starting to build again.
Directional risks appear skewed to the upside, pending unforeseen left tail risks. Traders may not have to wait long to put that view to the test.
Macro Risks Threaten Backdrop
While tariffs have faded from the market’s immediate focus, that may soon change. The Supreme Court’s ruling on the legality of the IEEPA tariffs could arrive as soon as Friday morning in the United States, presenting an obvious risk even that could impact sentiment.
Even if prediction markets favour the tariffs being ruled illegal, the market reaction is far from black and white. A decision against the measures would raise immediate questions about the fiscal outlook, given the potential gap tied to lost tariff revenues. That uncertainty alone could place upward pressure on longer-dated Treasury yields.
If yields lift on renewed fiscal noise, or if policymakers move quickly to replace the tariffs under alternative authorities, market volatility may pickup.
For the yen, this creates clear two-sided risks. Heightened uncertainty or higher yields may support defensive flows, while a ruling that reduces policy uncertainty, or upholds the tariffs, may boost risk appetite and drag long-end yields lower.
Accompanying that risk, geopolitical tensions involving Iran add another layer of uncertainty for yen pairs. As seen repeatedly in recent years, market reactions to these episodes have often proved short lived, which likely explains the relatively muted response to the latest escalation.
Alongside this event risk, geopolitical tensions involving Iran add another layer of uncertainty for yen pairs. Market reactions to these episodes have often proved short lived, which likely explains the relatively muted response to the latest escalation.
The true left tail risk sits with the possibility of broader conflict following an attack from either side, with the market impact likely to be far greater than if tensions stabilise. History suggests shocks in this space are often brief but history does not always repeat.
