EURJPY hit a new 2½-year low earlier this week at 116.55 but found fresh buy orders and recovered a small portion of its losses. That said, the broader outlook remains negative as the price structure still consists of lower highs and lower lows, while the pair is also trading well below its 50- and 100-day simple moving averages (SMAs).
Short-term momentum oscillators suggest that the current rebound may continue for now. The RSI – although in bearish territory – is pointing higher, while the MACD looks to be distancing itself to the upside from its red trigger line.
If the bulls stay in control, their first obstacle could be the 119.60 zone, where an upside break would turn the focus to the 50-day SMA, currently at 120.13. Even higher, the 121.35 hurdle may provide resistance, before the 100-day SMA at 121.74 comes into scope.
Should sellers retake control, the initial target may be the 2½-year low of 116.55. A downwards violation would mark a new low on the daily chart, signaling that the broader downtrend is back in force, and opening the door for a test of 113.70 – the November 2016 low. Lower still, the October 2016 trough of 112.60 would attract attention.
In short, the big picture is bearish, though a clear move above the 100-day SMA could turn the outlook to a more neutral one.
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