On March 20, 2025, during the European morning session, the EUR/JPY cross currency pair briefly dipped below the critical level of 183.50, primarily driven by heightened risk aversion due to escalating geopolitical tensions. The yen, as a traditional safe-haven currency, received widespread buying support, while the euro faced pressure from the European Central Bank's recent cautious stance. Despite the short-term downward pressure, the medium-term bullish structure of the currency pair remains intact from a technical perspective, and the current pullback is more likely a normal correction within the trend.
From a technical standpoint, 183.50 was previously the intersection of the 50-period simple moving average on the four-hour chart and a psychological level, and its breach prompted some short-term bulls to exit. However, the price remains firmly above the 200-day moving average, indicating that the long-term trend direction has not changed. On the weekly level, the gradually rising low pattern formed since the fourth quarter of 2024 remains valid, and the current price is close to the 38.2% Fibonacci retracement level of the previous rally, an area that has historically served as significant support for trend continuation. Market analysis suggests that unless the price clearly breaks below the multiple support cluster around 182.80, the short-term bias is still inclined to maintain a bullish outlook.
From a fundamental perspective, the divergence in monetary policies between Europe and Japan continues to be the core logic driving the movements of this currency pair. Although the Bank of Japan is gradually exiting its yield curve control policy, it still maintains an extremely accommodative stance overall, with interest rate expectations remaining close to zero, which suppresses the appreciation potential of the yen. In contrast, while the European Central Bank has slowed the pace of interest rate hikes, the persistent inflation in the services sector keeps interest rates significantly higher than those in Japan, providing some interest rate differential support for the euro. This interest rate differential pattern typically favors a stronger EUR/JPY when risk appetite rebounds.
Market observers note that EUR/JPY is often seen as a barometer of global risk sentiment. During periods dominated by risk aversion, this currency pair tends to face downward pressure, but once market confidence is restored, the previously accumulated bullish momentum can be quickly released. Therefore, the current pullback is better understood as a phase of consolidation rather than a trend reversal.