The EUR/JPY pair is trading around 172.05 in early European market hours, showing a slight decline of 0.15%. The technical outlook remains generally positive, as the pair stays above the 100-day EMA. However, the RSI suggests that it may be overbought, which could limit further gains. Resistance is noted in the 172.95-173.00 range, while immediate support is at 170.81. If the price exceeds current resistance, it could aim for 174.52 and potentially 175.43. Conversely, a drop below support might lead to a test of the 170.00 psychological level, with further downside possible at 169.04.

Impact of US Trade Policies

The Euro’s value against the Japanese Yen is affected by recent US trade policies, which have imposed a 30% tariff on EU imports. This development adds to market uncertainties stemming from geopolitical issues. The Euro serves as the official currency for 19 countries in the Eurozone and is the second most traded currency worldwide, accounting for 31% of global foreign exchange transactions in 2022. The European Central Bank plays a crucial role in setting interest rates; when rates are higher, they tend to attract global capital, boosting the Euro. Economic data releases are important as they give insights into the economy’s health and can impact the Euro. Key indicators include GDP growth, inflation rates, and trade balances, all of which can influence the currency’s strength based on their performance. Currently, the EUR/JPY pair has pulled back slightly to just above 172.00 but generally remains technically supported. Although this pullback seems minor, the pair is consistently above the 100-day exponential moving average, a common long-term trend indicator that helps ignore short-term fluctuations. Traders may find reassurance in this, though they should note that the Relative Strength Index suggests overbought conditions. While this doesn’t guarantee a reversal, it often aligns with slowdowns or corrections. Resistance is close, between 172.95 and 173.00. If this zone is breached, it would confirm upward momentum and aim for 174.52, potentially reaching 175.43, a level not seen since late 2008. However, a failure to break through could bring prices back toward key support at 170.81. A decisive drop below that could lead to a focus on the 170.00 level, which is significant in the markets; sharp reactions often occur near such round numbers. If that level is breached, the next target will likely be around 169.04.

Washington’s Trade Impact

What’s driving this movement? It starts overseas. Washington’s recent decision to apply a 30% tariff on EU imports has sent ripples across global trading sectors. This shift has currency implications, as investors often change their strategies based on trade expectations. The result has been a temporarily stronger Euro against lower-yield currencies like the Yen. From a monetary perspective, the focus naturally shifts to Frankfurt. The European Central Bank plays a key role in shaping policy and has indicated that managing interest rates is vital for controlling the economy. Higher rates typically attract foreign investment seeking better returns, which supports the Euro. However, if rate expectations shift or if the inflation data disappoints, the situation can change rapidly. In the coming weeks, macroeconomic releases will be critical in determining whether current trends hold or need adjustment. GDP growth, inflation figures, and trade balances will reveal if the broader economy is expanding or facing challenges. These data points influence global opinions on future monetary policies, and therefore hold significant power. Currently, the markets expect a steady Euro environment, at least until new data alters this outlook. Be prepared for volatility; price movements are likely to come in waves, and strategies should reflect this. Create your live VT Markets account and start trading now.

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