EURJPY had a constructive day on Monday, bouncing sharply back into the 124.00 area until it met strong resistance around the 50-day simple moving average (SMA).
The positive correction closed marginally above the 124.40 neckline of a bearish head and shoulder pattern, and it remains to be seen if the pair can sustain strength above that level, eliminating the risk of a down-trending market.
Still, the momentum indicators have yet to show a clear bullish bias, suggesting that the bears have not fully faded. Although the MACD continues to recover within the negative zone and above its red signal line, the Stochastics are consolidating around their 80 overbought level, while the RSI is barely above its 50 neutral mark.
Technically, a decisive close above the 50-day SMA currently around 124.80 is expected to rest near the 125.60 restrictive area before touching the key 126.40 hurdle. A break higher would resume hopes that May’s uptrend may continue, especially if the 127.06 peak is surpassed, sending the price towards the 129.00 barrier.
In the negative scenario, a decline below the 20-day SMA, which is currently around the 124.00 level and near the 23.6% Fibonacci of May’s rally would shift the spotlight towards the 123.00 support level and the 38.2% Fibonacci of 122.23. Beneath the latter, the bears may seek a new low around the 200-day SMA and the 50% Fibonacci of 120.75, strengthening the downtrend that started from the 127.06 peak.
Meanwhile in the medium-term picture, the pair adopted a neutral profile following the break below June’s high of 124.42.
Summarizing, EURJPY is holding a weak short-term positive bias. Additional gains above 124.40 and a rally above the 50-day SMA could improve sentiment.
