EUR/JPY Surges to 169.27 Amid Bullish Momentum

The article discusses the surge in the EUR/JPY exchange rate, which has reached a 40-year high, driven by a bullish technical outlook and strong upward momentum, with implications for global trade and investment. The strength of the euro, weakness of the dollar, and market expectations for future interest rate decisions by central banks, including the ECB and BOJ, are key factors influencing the pair's trajectory. This description focuses on the primary topic of the EUR/JPY exchange rate, the main entities involved (euro, yen, ECB, BOJ), the context of global trade and investment, and the significant actions and implications related to the subject matter. The description also provides objective and relevant details that will help an AI generate an accurate visual representation of the article's content, such as a graph or chart showing the exchange rate's upward trend.

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Bijay Laxmi
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EUR/JPY Surges to 169.27 Amid Bullish Momentum

EUR/JPY Surges to 169.27 Amid Bullish Momentum

The EUR/JPY exchange rate has experienced a relentless upward movement over the past week, currently targeting the 169.27 level, which proved challenging to claim despite a flash spike to a 40-year high of 171.56. The pair has jumped back above January's upward-sloping channel, signaling potential buying interest in the coming sessions.

Why this matters: The EUR/JPY exchange rate's surge has significant implications for global trade and investment, as it can influence the competitiveness of European and Japanese exports. A continued upward trend could also impact the value of other currencies and commodities, leading to a ripple effect in the global economy.

The bullish technical outlook for EUR/JPY is supported by several key indicators. The Relative Strength Index (RSI) continues to trend upward while remaining below the overbought level of 70. However, the stochastic oscillator is looking for a bearish turn above its 80 overbought level, which may struggle to repeat its recent success.

If EUR/JPY decisively surpasses the 170.00 level, it could pave the way for reaching the 40-year high of 171.56 or establishing a new higher high within the 172.25-172.70 trendline area. Beyond that, the rally might expand towards the 175.00 round level or up to the 161.8% Fibonacci extension of the previous downleg at 176.23.

On the downside, a step below the 167.25-167.95 area, where the 23.6% Fibonacci retracement of the November-April upleg is placed, could initially halt near the 20-day simple moving average (SMA) at 166.45. If selling forces persist, the price might retest the 50-day SMA and the lower boundary of the bullish formation within the 164.00-164.60 region.

The euro's strength against the yen comes amid a falling dollar index (DXY00), which has dropped to a 1-week low, down 0.14%, weighed down by the euro's strength. Fed Chair Powell's comments have reduced the likelihood of a rate hike, further weakening the dollar. The euro has also been supported by hawkish comments from ECB Governing Council member Wunsch, who suggested that the ECB shouldn't rush into further interest rate cuts after a likely first cut in June.

Market expectations and forecasts also play a role in the EUR/JPY exchange rate. Swaps are discounting the chances of a -25 bp rate cut by the ECB at 94% for its next meeting on June 6. The markets are discounting the chances for a -25 bp rate cut at 10% for the June 11-12 FOMC meeting and 34% for the following meeting on July 30-31. Meanwhile, swaps are pricing in the chances for a +10 bp rate increase by the BOJ at 39% for the June 14 meeting.

In summary, the EUR/JPY exchange rate has surged to 169.27, marking a 0.44% increase, driven by a bullish technical outlook and strong upward momentum. While EUR/JPY bulls might stay in charge in the coming sessions, their ability to successfully surpass the 169.27-170.00 constraining territory remains uncertain. The strength of the euro, weakness of the dollar, and market expectations for future interest rate decisions by central banks will continue to influence the pair's trajectory.

Key Takeaways

  • EUR/JPY surges to 169.27, driven by bullish technical outlook and strong momentum.
  • Pair targets 170.00, with potential to reach 40-year high of 171.56 or 175.00.
  • Euro's strength and dollar's weakness contribute to EUR/JPY's upward trend.
  • Market expectations for interest rate decisions by ECB, Fed, and BOJ influence EUR/JPY.
  • Bulls may stay in charge, but surpassing 169.27-170.00 territory remains uncertain.