The Euro (EUR) surged for a second consecutive day against the Japanese Yen (JPY) on Tuesday, driven by a broad-based sell-off in the Yen following renewed tariff threats from the United States.
The pair, EUR/JPY, climbed to trade near 171.80, a level not seen since mid-July 2024, marking a 0.56% gain on the day as risk sentiment took a hit and market participants repriced geopolitical risks. This article from Gradiopexo delivers expert insight and a full breakdown of the subject.
US Tariff Threats Ignite Market Repricing
The sharp move in the EUR/JPY cross came after the US President posted a series of letters on Truth Social on Monday evening, signaling plans to impose a 25% tariff on all Japanese imports starting August 1. The rhetoric rekindled trade tensions between the world’s largest and third-largest economies, sending the Yen tumbling across major pairs and fueling renewed volatility in the foreign exchange (FX) market.
The US President’s move, which cites “unfair trade practices,” could significantly disrupt global trade flows and unsettle financial markets, especially if Japan retaliates or if other countries are drawn into a new tariff escalation cycle. Investors rushed to reposition, abandoning the Yen, traditionally a safe-haven currency, in favor of higher-yielding and less exposed assets such as the Euro.
EUR/JPY Trades at 12-Month High
The EUR/JPY pair has been on an upward trajectory since early June, buoyed by consistent Euro strength and persistent Yen weakness. On Tuesday, the pair extended its bullish momentum, hitting an intraday high just shy of 171.80, a level not visited since July 17, 2024.
At the time of writing, the pair remains firmly bid, reflecting not only geopolitical concerns but also diverging monetary policy paths between the European Central Bank (ECB) and the Bank of Japan (BoJ). While the ECB has retained a relatively hawkish stance, with hints of further normalization and tapering, the BoJ continues to maintain ultra-loose monetary conditions, placing downward pressure on the Yen.
EU Escapes Tariff Crosshairs, For Now
Interestingly, the European Union (EU) was not named in the latest tariff communications. While both Japan and South Korea reportedly received formal letters from the White House outlining the proposed 25% import duties, the EU remains excluded for now.
Behind the scenes, US-EU trade negotiations are gaining pace, with Washington reportedly proposing a tariff reset aimed at lowering most import duties to a 10% baseline, while maintaining higher tariffs for sensitive sectors such as automobiles, steel, and aluminum.
Although Brussels is working on a draft framework to avoid escalation, internal divisions, particularly between Germany and France, could stall any timely agreement. A failure to produce consensus might prompt retaliatory measures from the EU, injecting further uncertainty into global markets and keeping risk assets under pressure.
Technical Analysis: Bulls Remain in Control
From a technical perspective, EUR/JPY remains in a firmly bullish setup, supported by strong trend indicators and positive momentum dynamics. The pair is trading comfortably above the ascending 20-day Simple Moving Average (SMA), currently at 168.61, which also acts as the middle line of the Bollinger Bands.
EUR/JPY continues to press against the upper Bollinger Band, signaling sustained upward momentum. The breakout above the key psychological level of 170.00 has confirmed the pair’s bullish bias, while the lack of rejection or reversal signals suggests the trend remains intact.
Support and Resistance Levels
Looking ahead, immediate resistance lies near 172.83, the high from July 17, 2024. A break above this level could open the door toward 174.00 and possibly 175.50, both of which are longer-term targets based on Fibonacci extensions and prior supply zones.
On the downside, initial support is located at the 20-day SMA near 168.60. This area also corresponds with the midline of the Bollinger Bands, providing a key pivot zone in case of a pullback. Deeper losses could expose the lower Bollinger Band at around 165.00, which has historically served as both resistance and support and may act as a trend-defining level.
Conclusion
The EUR/JPY rally reflects a complex interplay of geopolitical risk, divergent monetary policy, and technical momentum. The US President’s latest trade threats have hurt the Japanese Yen, shifting the narrative and exposing the currency to additional downside risk in the coming sessions.
Until tensions ease or Japan responds with a robust counter-strategy, the Euro is likely to remain supported, keeping the EUR/JPY pair on the front foot as bulls aim for new multi-year highs.
