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The United States and Japan join forces with VS the EU, the countdown to "nuclear bomb-class" on August 1
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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Decision Analysis]: The United States and Japan join forces with VS the EU, and the countdown to the "nuclear bomb level" on August 1st". Hope it will be helpful to you! The original content is as follows:
On Wednesday (July 23), the euro consolidated narrowly against the Japanese yen around 172.40. The United States and Japan reached a trade agreement on Tuesday, but the European and American negotiations remained in a stalemate (the United States threatened to impose 30% tariffs on the EU, which took effect on August 1). The ECB interest rate resolution is approaching, and if it releases a hawkish signal, it may affect the interest rate spread; the Bank of Japan's dovish stance continues, and the German-Japan interest rate spread supports the euro. Technical aspects focus on the support of the 10-day moving average of 172.27 moving average.
Euro and Japanese yen consolidation at a high level
On Tuesday evening local time, on Wednesday morning, Beijing time (July 23), the U.S.-Japan trade agreement was reached. After a roller coaster trend, the euro fell into a narrow range of fluctuations, mainly due to the suppression of the Japanese tariff agreement and the unstable boost from the Japanese political party. Trade tensions between the United States and its major trading partners have also become a core focus. As the trade negotiations between the EU and the United States and Japan were xm-links.completed, as of press time, the euro-JPY exchange rate hovered around 172.50, and the exchange rate had fallen 0.39% to 171.65 earlier in the session. However, due to the news that Shigeru Ishiba may announce his resignation at the end of August, the exchange rate quickly recovered its decline, and once stretched 60 points to 172.73 in the short term.
The market focuses on the international trade situation
The United States has reduced the tariffs on automobiles against Japan from 25% to 15%, but it still retains a 30% threat to the EU. Japan and the EU are preparing for the sharp increase in the U.S. export tariffs are scheduled to take effect on August 1, and negotiations have entered a critical stage.
For Japan and the euroFor export-dependent economies like the region, the risks of broader trade disputes continue to put pressure on market sentiment. The Deputy Governor of the Bank of Japan said that the US-Japan trade agreement has made significant progress and will reduce uncertainty about Japan's economic outlook, while EU officials are holding talks in Brussels. As of press time, the senior EU and the U.S. trade representatives have not been confirmed to have face-to-face meetings. The outcome of the U.S.-EU talks is crucial. If the negotiations break down, the U.S. is expected to impose a 30% tariff on EU goods, and the EU is ready for retaliation measures, with targets including U.S. digital services and aerospace equipment.
ECB Interest Rate Resolution: Another catalyst for the euro against the yen?
The euro also faces the risk of events brought by the ECB's upcoming interest rate resolution on Thursday. While no immediate policy changes are expected, the monetary policy statements and press conferences that follow may give people an idea of the ECB's assessment of inflation risks, growth dynamics and possible policy adjustments later this year. The Bank of Japan is expected to remain stable in July and September to raise interest rates by 25 basis points this year.
Future attention in the future
Tariff end: The United States has reduced tariffs on automobiles to Japan from 25% to 15%, but it still retains a 30% threat to the EU and will take effect on August 1. Japanese negotiator Ryo Akazawa said that the mission was xm-links.completed, but there is no face-to-face schedule for EU negotiations. The tariff difference directly gives the euro to the Japanese yen a relative premium against the US dollar to the Japanese yen.
You can also pay attention to the upcoming consumer confidence indexes in Germany and the EU and the German PMI index, etc., which will be released on Thursday.
Technical Analysis
From a technical perspective, the euro and the Japanese yen are still in the consolidation stage since the year-on-year high of 173.25 hit last week. Currently, the currency pair is trading above the 10-day moving average support level, which is around 172.27, while the instant resistance is at the intraday high of 172.92, slightly below the psychological threshold of 173.00.
If you can confirm that this level is broken, it may open up space for it to move towards 173.50, with further resistance near the July 2024 high of 175.43.
In the downward trend, the initial support level is 170.50. If there is a deeper decline, buying may emerge in the range of 169.70-170.00, and the 20-day simple moving average intersects with the previous consolidation low in this range.
The relative strength index (RSI) remains around 63, showing a downward trend after leaving the overbought area, which may mean that the bullish momentum will continue to weaken.
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