EURJPY had a bullish start on Monday, after the strong rebound on the five-month low of 120.77, with the price breaking a crucial level of 121.00 and the 20-period simple moving average (SMA) in the 4-hour chart. The pair is approaching its negatively sloped 40-SMA, which is acting as a key resistance level.
The RSI and the stochastic oscillator are suggesting a possible overstretched market as both are returning slightly lower. The stochastic posted a bearish crossover within the %K and %D lines below the oversold area, while the RSI is flattening near the neutral threshold of 50. However, the MACD oscillator is still increasing its distance above the trigger line in the bearish area.
In case the pair continues its short-term direction to the upside, the bulls will probably challenge the 23.6% Fibonacci retracement level of the downleg from 126.80 to 120.77, around 122.20. A break higher, could last until 122.80, taken from the peaks on May 24 and the 38.2% Fibonacci of 123.10.
Alternatively, declines may drive the pair towards the 20-SMA currently at 121.40 before the five-month low (120.77) and the 120.60 support level come into view again.
Briefly, the pair switched to positive mode after the rally off 120.77. However, a run above the 61.8% Fibonacci (124.50) could switch the medium-term negative outlook to bullish. In case of a failed attempt to surpass the 40-SMA the bias could turn back lower.
