USD/JPY, EUR/JPY Forecast: Oversold Momentum Tests 2024 Lows

USD/JPY and EUR/JPY are flashing daily oversold momentum signals not seen since 2024, raising the risk of a near-term reversal ahead of the U.S. CPI report and Federal Reserve policy decision.

Both currency pairs are approaching key technical levels:

• USD/JPY is nearing the lower boundary of a respected uptrend channel that has been in place since 2023. Daily momentum is also approaching oversold levels last seen in 2024.
• EUR/JPY is testing the 27.2% retracement level of the 2025–2026 advance, while daily momentum has reached oversold levels last seen in 2024.

These developments come amid expectations and risks surrounding a potential Bank of Japan rate hike, ahead of Friday’s U.S. CPI report, and as Brent crude prices move back above $100 per barrel.

According to the Food and Agriculture Organization of the United Nations, the global food price index rose in August to its highest level since late 2022.

With oil prices elevated, geopolitical tensions unresolved, inflation concerns increasing and daily momentum reaching oversold levels not seen since 2024, a reversal in the direction of USD/JPY and EUR/JPY may be developing.

USD/JPY Forecast: Weekly and Daily Time Frames — Log Scale

Source: TradingView

Following the breakdown below the April 2025–July 2026 uptrend, USD/JPY has been respecting the Fibonacci retracement levels of that advance.

Price action recently dropped below the 38.2% retracement at 154.80 and is now only a few points away from the 50% retracement and the next projected support zone near 152.

This level also aligns with the lower boundary of the parallel April 2025–July 2026 channel. At the same time, the daily RSI is showing a bullish divergence from oversold levels last seen in 2024.

This setup hints at a potential final leg lower before a possible reversal during the month.

Bearish scenario: A breakdown below 152 would signal further weakness in the dollar and additional strength in the yen. This could target the lower boundary of the larger channel that has been in place since 2023, near 149.

The 149 area could create another major reversal risk, particularly if momentum sinks deeper into oversold territory across multiple time frames.

Bullish scenario: Reclaiming 154.80 would strengthen the short-term bullish case and open the way toward the 158.40–161 zone.

This area represents a defining barrier between long-term bullish continuation toward the yearly highs and potentially 170, and the risk of another corrective move.

Overall, the bias leans toward a short-term bearish correction while the longer-term bullish structure remains in place.

EUR/JPY Forecast: Weekly and Daily Time Frames — Log Scale

Source: TradingView

From a weekly perspective, EUR/JPY is holding above the 27.2% retracement level of the February 2025–April 2026 uptrend, near the 178 mark.

At the same time, the daily RSI is falling into oversold territory last seen in 2024, increasing the risk of a bullish reversal in correlation with the USD/JPY chart.

If price drops below 178, the next target would be the 38.2% retracement near 175. This level also aligns with the July 2024 high and could create a high-probability dip-buying setup if momentum indicators move deeper into oversold territory across multiple time frames.

On the upside, a breakout above 181.40 would redirect price action toward the yearly highs and the 8-month resistance zone near 185.60–187.

A sustained move above this zone could open the way toward new multi-year highs.

Overall, the short-term bearish bias and longer-term bullish risks remain in focus.

Written by Razan Hilal, CMT

Follow on X: @Rh_waves