This week, crucial economic data—ranging from Germany’s inflation to the US nonfarm payrolls—will shape market sentiment. EURJPY shows sustained bullish momentum, backed by technical patterns and strong indicators.
On the fundamentals side, Trump’s re-election adds uncertainty for Europe, while Japan eyes moderate growth amid wage-driven consumption. Traders face a complex landscape of opportunities and risks driven by geopolitical shifts and economic forecasts.
Overview
This week, crucial economic data—ranging from Germany’s inflation to the US nonfarm payrolls—will shape market sentiment. EURJPY shows sustained bullish momentum, backed by technical patterns and strong indicators.
On the fundamentals side, Trump’s re-election adds uncertainty for Europe, while Japan eyes moderate growth amid wage-driven consumption. Traders face a complex landscape of opportunities and risks driven by geopolitical shifts and economic forecasts.
Key Economic Events
Monday All Day - Germany: Prelim CPI m/m (EUR)
Tuesday 09:30 am (GMT+2) - Switzerland: CPI m/m (CHF)
Tuesday 17:00 (GMT+2) - USA: ISM Services PMI (USD)
Tuesday 17:00 (GMT+2) - USA: JOLTS Job Openings (USD)
Wednesday 02:30 am (GMT+2) - Australia: CPI y/y (AUD)
Wednesday 15:30 (GMT+2) - USA: Unemployment Claims (USD)
Friday 17:30 (GMT+2) - Canada: Employment Change (CAD)
Friday 17:30 (GMT+2) - USA: Nonfarm Employment Change (USD)
Technical Analysis
Since reaching a low of 156.168 on December 3, the EURJPY currency pair has exhibited a bullish trajectory. The price action formed a Spinning Top Japanese candlestick indicating the weakness of the sellers to maintain market control. Subsequently, a failure swing reversal pattern, breaking above the 50-period Exponential Moving Average (EMA), has accelerated the upward momentum. Notably, the trough at 159.796 failed to drop below the prior trough and then surpassed the preak at 162.462, signaling the potential for further increases. Furthermore, key indicators such as the Momentum Oscillator and Relative Strength Index (RSI) have both emerged above their neutral thresholds of 100 and 50, respectively, confirming strengthening bullish pressure.
Potential Upside Targets
Should the bulls maintain market control, traders may direct their attention toward the four potential resistance levels below:
164.890: The initial resistance is 164.890, which represents the peak formed on December 30.
166.678: The second price target is identified at 166.678, corresponding to the swing high from October 31.
170.010: The third target is established at 170.010, aligning with the weekly resistance, R2, calculated using the standard Pivot Points methodology.
171.089: An additional price target is estimated at 171.089, which corresponds to the 423.6% Fibonacci Extension drawn from the high point, 162.462, to the low point, 159.796.
Potential Downside Targets
Should the sellers take market control, traders may consider the four potential support levels listed below:
161.288: The first level of support is determined at 161.288, representing the weekly Pivot Point, PP, calculated using the standard methodology.
159.796: The second support level is identified at 159.796, reflecting the swing low marked on December 18 which coincides with the 161.8% Fibonacci Extension drawn from the low point, 160.891, to the high point, 162.802.
157.686: The third support level is seen at 157.686, corresponding to the weekly support, S1, calculated using the standard Pivot Points methodology.
156.168: An additional downward target is observed at 156.168, corresponding to the swing low from December 3.
Fundamentals
Donald Trump's return, with full Republican control of Congress, poses significant challenges for Europe in trade, defence, and climate policy, according to a Euronews report. Analysts warn that his "America First" agenda could strain transatlantic ties and disrupt EU economic stability. Former European Commission President José Manuel Barroso views this as a crucial moment for Europe to bolster competitiveness and self-reliance.
Potential tariffs and policy uncertainty could cost the eurozone 1% of GDP, while increased NATO spending may further strain EU budgets. These pressures could weaken the euro, especially if EU growth slows and fiscal burdens rise. Experts urge the EU to act decisively to safeguard its economy and assert geopolitical autonomy.
On the other hand, a survey by the Japan Center for Economic Research predicts Japan’s economy will grow by 1.1% in real terms in fiscal 2025, driven by wage increases boosting consumer spending. This forecast is more optimistic than the current fiscal year’s expected growth of 0.4%. Economists expect wage growth to outpace inflation, with the consumer price index rising slightly above 2%.
However, potential risks include trade tensions under a returning Trump administration and a prolonged slowdown in China, both of which could hurt Japan’s export-driven economy. Domestically, the government aims to support wage hikes among small and medium-sized businesses to promote a sustainable cycle of wage and price growth.
Conclusion
In conclsuion, this week’s key economic data releases, coupled with evolving geopolitical factors, will significantly influence market dynamics. While EURJPY continues its bullish trend, traders should remain vigilant of potential risks, including heightened trade tensions and global economic uncertainty. With Europe facing policy challenges under a Trump administration and Japan eyeing moderate growth, market participants must carefully balance opportunities with potential downside risks.