EUR/JPY - Long term

In the trend of Euro/Yen, since the introduction of Euro in January 1999, we can notice, as a whole, 4 different macro-phases:

Phase I (Jan 1999 – Oct 2000): falling down

After being exchanged in the 132.50-135.50 area, just after the start of transactions in January 1999, the cross  EurYen fell to a historical low at 88.97 on October 26th, 2000.

Phase II (Nov 2000 – Jul 2008): strong euro rally

Since November 2000, there is the developing of a long phase dominated by a strong Euro, with the yen systematically sold and used as a funding currency, in order to finance investments in asset classes denominated in other currencies. This carry-trade activity brought to a “currency bubble”, which kept inflating till the burst of the real estate-financial bubble since Summer 2007. The cross reached a historical high at 169.95 in July 2008 (+91% vs. the year 2000-bottom).

Phase III (Aug 2008 –  July 2012): euro’s collapse

With the burst of the real estate-financial bubble, since Summer 2007 and with an acceleration after Lehman Brothers’ bankruptcy in September 2008, a progressive strong disinvestment out of the major world Bourses brought to heavy buying of Japanese yens in order to square-up the enormous carry trade positions accumulated in the years before. That brought to a collapse of the cross euro/yen, fuelled by a double drive: the fall of the euro vs. the US dollar plus the fall of the US dollar vs the Yen. The cross collapsed to a low at 94.12 on July 24th (-44.6% from the historical high).


EUR/JPY analysis


Phase IV (July 2012- today): euro’s recovery

Since the end of July 2012, a really strong rally was favoured by the first cheering-up signals in the euro-zone – that contributed to a renewed risk-on attitude in the financial markets – together with the aggressive monetary easing that has been implemented by the Abe administration since the end of 2012. At the beginning of December 2013 the cross overcomes the previous tops around 139.20, unbroken since November 2008, pushing recently over 140-141. An eventual correction should remain above the strong support area 128.25-129 in order to validate the bullish signals of the last 12-18 months.

As long as the cross stays above the support at 135, the up-trend remains bullish: a confirmation of the recent break above the strong resistance at 139.25 (tops since June 2009) triggers as first important target the resistance at 145. Lose of momentum in case of a fall below 134, but a clear signal of weakness would only be triggered by a break below 130-131 (not very likely). The technical outlook for the coming weeks and months would only be jeopardized in case of a break below the strong support area 128.25-129 (unlikely).






3-6 months







6-12 months






12-18 months






Maurizio Milano