The EUR/JPY pair is cooling off after tagging its highest level in over a year. Following Wednesday’s spike to 172.28, the cross slipped back toward 171.40 during the Asian session, as risk sentiment took a turn and traders flocked to safety.
The pullback comes amid escalating trade jitters, with the Japanese Yen catching a bid as investors hedge against a potential tariff storm. Here’s what’s driving the shift, and why EUR/JPY might remain choppy in the short term.
Here’s what you need to know and why it matters:
1. Safe Haven Flows Lift the Yen
The tariff levels in the letters to seven more countries ranged from 25% to 30% and will apply from August 1.
Follow live updates: on.ft.com/4kxKKqt
— #Financial Times (#@FT)
5:34 PM • Jul 9, 2025
Trump’s latest salvo in the tariff wars came Wednesday, when his administration rolled out a batch of country-specific letters outlining steep new tariffs between 20% and 50% for eight countries, set to begin August 1. That spooked markets, leading traders to rotate into defensive assets, and the Yen is historically a top pick in moments like this.
2. Japan Tariff Drama Isn’t Over
While the Yen is gaining from safe-haven flows, Japan’s direct involvement in the trade dispute could cap those gains. A fresh 25% tariff on Japanese exports adds pressure on Tokyo to strike a deal before the deadline. Japan is scrambling to arrange talks with the U.S., eyeing a July 19 meeting at the World Expo between negotiators, and possibly even Prime Minister Ishiba.
Editorial: Japan must negotiate, not bow to pressure, as US announces 25% tariff rate
— #The Mainichi (Japan Daily News) (#@themainichi)
6:01 PM • Jul 9, 2025
3. EU-US Talks Ease Euro Pressure
On the Euro side, some relief is coming from the trade front. EU trade chief Maros Sefcovic said "good progress" was being made with Washington, and a framework deal could be reached soon. But Italy’s economy minister warned the situation remains "very complicated." If talks drag out, the Euro could weaken again, especially if risk sentiment deteriorates further.
4. Technicals Say Rejection, Not Breakdown
EUR/JPY was rejected just under 172 area, the key resistance from July, 2024 highs. Price is now consolidating around 171.70 after peaking at 172.28, showing signs of temporary exhaustion. However, the structure remains bullish: price is well above the 50-day SMA (currently at 165.87), and previous resistance at 171.63 is now acting as immediate support. As long as bulls defend this level, another push toward 172.72 remains likely.
If the pair breaks below 171.00, that could trigger a deeper pullback toward the 170.64 minor support zone or even the rising 50-day SMA near 165.87. For now, momentum favors buyers, but signs of a top are emerging unless EUR/JPY can make a clean breakout above 172.72 then possibility of reaching 175 highs.
Here’s the Takeaway:
EUR/JPY is caught in a geopolitical tug-of-war. Safe-haven Yen demand is clashing with Euro resilience, and the trade deadline clock is ticking. If Japan secures a last-minute deal, the pair could rebound. If not, expect more downside volatility. Either way, we should keep an eye on both fundamentals and headlines, this isn’t just a chart story anymore.
