Market Insights > Daily Market Analysis

16 June 2025,07:57

Daily Market Analysis

Japanese Yen Holds Steady Despite Middle East Tensions as BoJ Decision Looms

16 June 2025, 07:57

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Key Takeaways:

*Japanese Yen stood firm ahead of Tuesday’s BoJ monetary policy decision.

*The Israel-Iran conflict intensified, buoyed safe-haven Yen.

Market Summary:

The Japanese Yen has remained surprisingly stable at the start of the week despite heightened geopolitical tensions in the Middle East following an escalation in the conflict between Israel and Iran. Typically, the Yen benefits from its status as a traditional safe-haven currency during times of global uncertainty, as investors seek safer assets. However, this time, its reaction has been muted, suggesting that other factors are at play.

One key reason for the Yen’s subdued movement is the upcoming Bank of Japan (BoJ) interest rate decision, due tomorrow. Market expectations suggest that the central bank will maintain a cautious approach, refraining from any bold policy shifts given the current uncertainties in global financial markets. The BoJ may be hesitant to tighten policy aggressively, as doing so could risk destabilizing Japan’s fragile economic recovery or triggering unwanted volatility in bond markets. As a result, traders appear to be holding back on major Yen bets until the BoJ provides clearer guidance.

That said, if the conflict between Israel and Iran intensifies further, the Yen could still see a delayed safe-haven rally. Historically, geopolitical crises tend to drive demand for the JPY, especially when risk aversion dominates market sentiment. However, for now, the currency seems to be caught between opposing forces—geopolitical risk supporting it and BoJ policy uncertainty limiting its upside.

In the near term, the Yen is likely to trade in a relatively tight range until the BoJ’s decision is announced. Should the central bank surprise markets with a more hawkish stance, the JPY could strengthen. Conversely, if the BoJ maintains a dovish hold, the Yen may struggle to gain traction unless renewed Middle East tensions trigger a fresh wave of risk-off sentiment.

Technical Analysis

EURJPY, H4

The EURJPY has extended its winning streak to three consecutive weeks, climbing to its highest level since last November—signaling sustained bullish sentiment. However, signs of momentum fatigue are beginning to emerge, raising the prospect of a near-term technical correction.

Despite the pair pushing into fresh highs, the Relative Strength Index (RSI) has pulled back from overbought territory, while the MACD has started to drift lower. This divergence suggests that bullish momentum is moderating, potentially limiting further upside in the short term.

While the broader trend remains positive, EURJPY may face consolidation or a minor pullback if technical signals continue to weaken. A sustained break below short-term support could trigger profit-taking, though underlying strength in the euro could keep the downside limited.

Resistance levels:167.10, 169.40

Support levels: 165.10, 163.00

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