EUR/JPY Surges on Hopes of German Stimulus Approval
Market Overview
The Euro is gaining strength against the Japanese Yen as market optimism builds around Germany’s proposed fiscal expansion. On Tuesday, the Bundestag will vote on a substantial government borrowing package aimed at increasing defence spending and supporting infrastructure. The approval of this measure would provide a significant boost to Europe’s largest economy and stimulate growth across the broader Eurozone.
The proposal requires a two-thirds majority to override constitutional debt restrictions. If it passes the Bundestag, it must still gain approval from the Bundesrat, which represents Germany’s 16 federal states. Investors have responded positively to these developments, driving capital inflows into European assets. The German DAX index has surged over 16% year-to-date, reflecting growing confidence in the region’s economic recovery. This sentiment has also strengthened the Euro, pushing it higher against several major counterparts, including the Yen.
Technical Analysis
EUR/JPY has initiated a fresh rally after breaking out of its previous downward-sloping channel on the daily chart. The pair has cleared the key resistance level at 162.926, shifting attention toward the next major barrier at 165.140. If bullish momentum persists, a breakout above this level could pave the way for a test of the nine-month high at 167.584.
Momentum indicators confirm the strengthening uptrend. The RSI is rising above 60, reflecting increasing buying pressure, while MACD histogram bars continue to expand above the zero line, signaling sustained bullish momentum. However, if sellers regain control, a move back below 161.186 would invalidate the bullish scenario and push the pair back into its previous downward trend.
Key Technical Levels
- Resistance 1: 165.140
- Resistance 2: 167.584
- Support 1: 162.926
- Support 2: 161.186
- Support 3: 158.742
Fundamental Drivers
Traders will closely monitor Germany’s ZEW Economic Sentiment Index for March and the Eurozone’s January trade balance data. A stronger-than-expected ZEW reading could reinforce bullish sentiment toward the Euro. Additionally, geopolitical developments, particularly discussions between U.S. President Donald Trump and Russian President Vladimir Putin regarding Ukraine, may introduce fresh volatility, impacting broader market sentiment.
Conclusion
EUR/JPY remains in a strong uptrend, with buyers targeting 165.140 and potentially 167.584. A reversal below 161.186 would weaken bullish momentum. Key economic data and geopolitical developments will play a crucial role in shaping near-term price action.
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