EUR/JPY extends rally to one-year high as US NFP boosts risk sentiment

• EUR/JPY climbs to its highest level since July 2024, trading above 170.00 in the American trading session.
• Eurozone PMI figures improve in June, signaling a modest rebound in services activity.
• The technical setup remains bullish, with RSI signals indicating overbought conditions, but momentum remains firm.

The Euro (EUR) trades firmly against the Japanese Yen (JPY) on Thursday, with the EUR/JPY cross climbing to its highest level since July 2024 following upbeat US Nonfarm Payrolls (NFP) data. At the time of writing, the pair is edging higher, trading around 170.40 during the American trading session.

The latest US Nonfarm Payrolls (NFP) report came in stronger than expected, with the economy adding 147,000 jobs in June, surpassing market forecasts of 110,000 and slightly above May's revised figure of 144,000. The data eased concerns over labor market softness and helped boost global risk sentiment, weighing on the safe-haven Japanese Yen while supporting risk-linked currencies such as the Euro.

Adding to the Euro's strength, the latest Eurozone Purchasing Managers' Index (PMI) figures pointed to a gradual recovery in economic activity. The final Services PMI rose to 50.5 in June from 50 in May, slightly ahead of the flash estimate of 50, while the Composite PMI climbed to a three-month high of 50.6 from 50.2 in May. Although manufacturing output remains subdued, the overall improvement in sentiment suggests that the region is stabilizing, which offers additional tailwinds for the Euro.

The European Central Bank (ECB) published the minutes of its June policy meeting on Thursday, showing that officials are in no rush to cut interest rates further. Policymakers acknowledged that inflation has returned to the ECB's 2% target in June but flagged substantial uncertainties, namely the Euro's 14% year-to-date appreciation and persistent global trade tensions surrounding US tariffs. The accounts highlighted broad agreement among members to pause further easing in July, citing the need for clearer inflation and trade signals before considering additional cuts. Some policymakers noted that a stronger euro could slow down inflation even more, but might also hurt exports and economic growth.

Technically, EUR/JPY remains in a clear uptrend, with the pair trading above its 9-day Exponential Moving Average (EMA) at 169.22 and hugging the upper band of the Bollinger channel. The Relative Strength Index (RSI) stands at 71.92, indicating that the pair is slightly overbought, yet still supported by strong bullish momentum.

Immediate resistance lies at 171.09, which marks the high from July 23, 2024. A decisive break above this level could pave the way for further gains toward the 172.00-173.00 zone. On the downside, initial support is seen at 169.22 (9-day EMA), followed by 167.75, the midline of the Bollinger Band, which could act as a cushion during any short-term pullback.