EUR/JPY drops to 131.00 on global trade tensions

• JPY in demand on rising fears of trade war.
• Targeted tariffs are a part of the game, says Kudlow.

The Japanese Yen is on the rise, threatening to push EUR/JPY below 131.00 as rising fears of a trade war are pushing investors out of risky assets and into the safe haven assets.

Kudlow crash

US President Trump's decision to appoint Larry Kudlow as the top economic advisor has not gone down well with the markets. After all, Kudlow is a proponent of "targeted tariffs" and has reportedly said that China will be the target.

Consequently, investors are ditching risky assets on increased prospects of a full-fledged US-China trade war. The Dow index fell more than 200 points yesterday and as of writing, the S&P 500 futures are down 0.27 percent.

Thus, EUR/JPY is losing altitude and may extend losses further if the sell-off in the equities gathers traction.

EUR/JPY Technical Levels

Currently, the pair is trading at 131.05. The retreat from 132.44 (March 13 high) to 131.00 suggests the corrective rally from 129.35 (March 5 low) may have ended and a drop below 130.52 (March 8 low) will likely put sellers back in the driver's seat, opening doors for re-test of 129.35.

On the higher side, a move above 130.60 (200-day moving average) would expose 132.47 (38.2% Fib R of 137.51-129.35). However, only a close above the key Fib hurdle would signal a bearish-to-bullish trend change and will likely yield a sustained rally to 133.49 (50-day moving average).