EUR/JPY: Trade war fears and cautious ECB minutes weigh on Euro

• Safe-haven Japanese Yen is among the best performing G10 currencies in the last 24 hours on the back of renewed trade war tensions and tariffs on imported vehicles.
• The European Central Bank’s (ECB) Monetary Policy Meeting Accounts said that the “economic outlook is more uncertain” and “caution is needed”. 

In Asia, EUR/JPY continued its slide of the last two days and established an intraday low at the 128.00 earlier in Europe. The pair then rebounded about 87 pips and is now consolidating in the 128.50 region in early American trade, down 0.15% on Wednesday. 

The safe-haven Yen has been boosted on the back of geopolitical fears. In fact, in the last 24 hours, the Japanese Yen and the Swiss Franc have been the best performing G10 currencies on the back of rising concerns about international trade and worsening geopolitical tensions.  

US President Donald has expressed unsatisfaction with the progress of the second round of talks between the US and China. Moreover, news of tariffs up to 25% on imported vehicles to the US further strengthened the yen demand. “There will be big news coming soon for our great American Autoworkers. After many decades of losing your jobs to other countries, you have waited long enough!” tweeted Trump.

Additionally, it is still not quite clear if the meeting between Trump and the North Korean leader Kim Jong Un will actually take place on June 12 in Singapore. 

Meanwhile, the complex political situation in Italy still worries investors as the main Italian stock index MIB FTSE is trading at a 6-week low.

On the macroeconomic side of the story, the European Central Bank (ECB) released its Monetary Policy Meeting Accounts (minutes) earlier in Europe. Although the ECB said that it is “confident that inflation would rise towards the target in medium-term” it also expressed concerns over protectionism (trade war) which raises “raises uncertainty over the economic outlook” and can ”trigger disorderly FX moves (volatility).” As a result, the “economic outlook is more uncertain” and “caution is needed”. However, the minutes also pointed out that “growth risks are broadly balanced and growth is still solid, broad-based.”

Earlier in the day, the German Gross Domestic Product matched analysts expectations at 2.3 % for the first quarter of 2018 annualized while the GfK Consumer Confidence came slightly below expectations.

EUR/JPY 4-hour chart 

The pair is trading below its 50, 100 and 200-period simple moving averages (SMA) on the 4-hour chart suggesting a strong downward bias. Supports are seen at the 128.50, 128.00 and 127.50 figures while resistances are priced in at 129.08 and 129.83 swing high.