EUR/JPY Price Forecast: Bullish outlook remains in play, overbought RSI warrants caution for bulls

• EUR/JPY gains ground to near 172.80 in Friday's early European session. 
• The cross maintains a constructive view above the 100-day EMA,  but the overbought RSI condition might cap its upside. 
• The immediate resistance level is seen at 173.25; the initial support level is located at 170.00.

The EUR/JPY cross gathers strength to around 172.80 during the early Asian session on Friday. The Japanese Yen (JPY) weakens against the Euro (EUR) amid reduced Bank of Japan (BoJ) rate hike bets. 

Japan's National Consumer Price Index (CPI) highlights the challenge the BoJ faces in balancing mounting inflationary pressure and risks to the fragile economy from US tariffs, as it considers how soon to resume rate hikes from still-low levels.

Technically, the constructive outlook of EUR/JPY remains in place as the cross is well-supported above the key 100-day Exponential Moving Average (EMA) on the daily chart. Nonetheless, the 14-day Relative Strength Index (RSI) stands above the midline near 70.50, indicating the overbought RSI condition. This suggests neutral momentum, indicating that further consolidation or a temporary sell-off cannot be ruled out before positioning for any near-term EUR/JPY appreciation.

On the bright side, the first upside barrier for the cross emerges at  173.25, the high of July 16. Further north, the next hurdle is seen at 173.55, the upper boundary of the Bollinger Band. A decisive break above this level could pick up more momentum and aim for 174.52, the high of July 3, 2024. 

On the other hand, the initial support level for EUR/JPY is located at the 170.00 psychological level. A breach of this level could expose 169.04, the low of July 2.  The additional downside filter to watch is 168.10, the low of June 25.

EUR/JPY daily chart