- EURJPY continues rebound from 2½-month low
- But meets obstacles in race towards 161 level
EURJPY has bounced back by more than 2% from the early December two-and-a-half-month low of 156.16. But the rebound has had a setback today, failing to get past the 20-day simple moving average (SMA) at 160.51.
The momentum indicators remain bullish, however, so there is a strong case for further gains in the short term. The stochastics have just entered the overbought region and a bearish crossover of the %K and %D lines doesn’t look imminent, while the RSI is steadily climbing below the 50 level.
If the bulls can overcome the immediate resistance at the 20-day SMA, the next hurdle is slightly higher at the 161.00 mark followed by the 162.00 level. Even higher, there’s likely to be some resistance around the 38.2% Fibonacci retracement of the July-August downleg at 162.41 and the 50-day SMA at 162.63. Clearing these obstacles would pave the way for the 200-day SMA at 164.70, which lies slightly below the 50% Fibonacci of 164.90.
However, for the medium-term picture to turn decisively bullish again, EURJPY would need to surpass the October 31 peak of 166.68.
On the other hand, if the positive momentum starts to wane and the price turns lower, there could be some support around 158.00 before attention turns to the December low of 156.16. A break beneath this trough would shift the medium-term outlook to bearish.
In a nutshell, EURJPY has a good chance of extending its rebound despite the several barriers ahead, but the medium-term trend will only be decided once there’s a climb above 166.68 or a drop below 156.16.
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