EUR/JPY recently hit a high of 172.28 this year but has since pulled back due to trade tensions and being overbought. The pair has struggled to break the resistance level at 173.00, as concerns over US tariffs on Japan weigh on the Yen. After solid gains since March, the EUR/JPY pair has faced resistance. It has fallen below 172.00 as the market focuses on ongoing trade talks between the United States, European Union, and Japan.

Impact of US Tariff Announcements

Recent tariff announcements from the United States have sparked speculation about their economic effects. Concerns are rising, especially regarding potential tariffs on auto parts and metals, affecting both Europe and Japan. With trade tensions ongoing, the Bank of Japan’s steady policy rate outlook reduces the likelihood of immediate rate changes. The Relative Strength Index (RSI) shows that the EUR/JPY pair is overbought, putting pressure on it to correct or consolidate until new trade agreements are reached. Technical analysis suggests potential support levels at 170.93 and 168.89. Without new trade deals, reaching the psychological level of 173.00 may remain challenging for now. After a strong upward trend early in the year, EUR/JPY is now facing a more volatile environment. It recently entered overbought territory—based on RSI metrics—before struggling around the 173.00 mark. The earlier momentum has slowed, and now the price is fluctuating below 172.00, indicating that easy gains could be behind us, at least temporarily.

Response to Washington’s Tariff Position

Washington’s tariff decisions have noticeably affected markets. Now, the focus is on how Brussels and Tokyo respond, especially in the automobile and base metals sectors. The uncertainty surrounding the tariffs, rather than the tariffs themselves, contributes to pressure on the Yen. The Yen typically reacts to perceived shifts in risk more than to policy changes, and the latest announcements haven’t eased investor concerns. Meanwhile, Tokyo policymakers are maintaining their current interest rate policy. This steadiness keeps expectations grounded. As a result, it’s hard to see upward movement for the Yen unless an external factor disrupts this stability. Conversely, the European Central Bank’s (ECB) discussions have kept the Euro strong but not overwhelmingly so. Recent weeks have shown that speculative positioning and sentiment are somewhat overheated. With the RSI in stretched territory and no new policy actions or breakthroughs in trade discussions, a technical pullback seems increasingly likely. Support levels are well-defined at 170.93 and 168.89, and prices often test these levels when momentum fades. It’s less about a loss of confidence and more about a shift away from momentum-driven trades. Traders should monitor whether new headlines alter perceived risks. Continued entrenched positions without diplomatic progress are likely to lead to range-bound movement. In the coming sessions, the pair’s direction may hinge on sentiment, technical levels, and the pace of diplomatic efforts. Current momentum alone won’t drive the price much higher without a new catalyst. Any rise towards 173.00 is likely to be short-lived without solid economic backing. From our perspective, we must consider risk alongside policy stability and external shocks. Charts provide context but don’t contain all the answers. Moving forward, it’s essential to focus on volume and macroeconomic news. The market’s reactions to the news, rather than the news itself, will offer greater insights for positioning. Create your live VT Markets account and start trading now.

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