EURJPY had a bearish start on Thursday, with the price breaking the lower surface of the Ichimoku cloud. The pair has also increased distance below their flattenning moving average lines, indicating that the latest downtrend might hold for longer after it touched the 18-month high of 127.05.
Momentum signals are bearish as well as the red Tenkan-sen line, which is below the blue kijun-sen line, looks to be heading south, while the RSI has reversed lower after falling below its 50 neutral mark. The stochastic oscillator completed a bearish crossover within its %K and %D lines around the oversold zone.
Should the price extend declines, the 125.18 barrier could act as strong support before the focus shifts straight to the 124.43 obstacle, registered on August 21. If the latter gives way to further weakness, the next stop could around the 124.00 psychological level.
On the other hand, a recovery could retest the 100-, 40- and 20-period SMAs at 125.75, 125.90 and 126.15 respectively. Moving higher, the 18-month peak of 127.05 should attract attention and any advances above this line could open the way for more increases in the short-term.
Turning to the medium-term picture, the bullish outlook came back into play after the rebound on the 114.40 support on May. For a continuation of the bull market though, traders need to wait for a clear close above 127.05.
