EURJPY raised the odds for a bearish trend reversal following the drop below the long-term ascending trendline and the Ichimoku cloud, with the 20- and 50-day simple moving averages (SMAs) further enhancing the bearish case after their recent intersection.
The price is currently consolidating Monday’s losses around a four-month low of 128.87 as the downward direction in momentum indicators keep favoring additional price declines. That said, the RSI and the Stochastics are flirting again with oversold levels, providing some optimism that the sell-off could soon take a breather perhaps near 128.30, where the 200-day SMA coincides with the March lows.
If the 128.30 area proves easy to break, the bears could accelerate to test the 127.30 restrictive region ahead of the 38.2% Fibonacci retracement of the long 114.42 – 134.11 upleg at 126.60.
On the upside, the 23.6% Fibonacci of 129.46 may attract some interest, though a close above the red Tenkan-sen line at 130.00, which has been capping upside corrections over the past two weeks, could be the key for an extension towards the 20-day SMA currently at 130.85. Moving higher, the bulls could slow down near the 132.00 mark and the 50-day SMA before speeding up to challenge the broken ascending trendline probably within the former resistance zone of 132.25 – 132.60.
In brief, EURJPY is in a bearish situation in the short-term picture, though with the price approaching an important support region and the momentum indicators hovering near oversold territory, an upside reversal cannot be excluded.