EURJPY has now reached its highest since February 2016 after hitting as high as 131.70 so far today. The pair has shifted to a more bullish outlook after reversing the decline from 131.17 (early August high) and made a strong recovery from 127.55 (August 18 low). The short-term technicals on the 4-hour chart are bullish.
The Tenkan-sen and Kijun-sen lines are positively aligned and rising, indicating the risk is to the upside in the near-term. The market is above the Ichimoku cloud which is also a bullish setup. Meanwhile, momentum indicators are in their respective bullish territory. It must be noted that the RSI has reached overbought levels at 70 which suggests that a consolidation or a pullback in EURJPY is likely.
Immediate support is expected at 130.98. A break below this would shift the focus to the key psychological level at 130.00. A deeper decline would bring 129.00 into sight which would give scope for further weakness towards the August 18 low at 127.55.
Alternatively, a short-term consolidation phase and a strong rebound from current levels would see a re-test of the 131.70 high. A sustained move higher would indicate the continuation of the short-term uptrend that started at 127.55, as well as the longer-term uptrend from 114.84 (April low).
In the bigger picture (daily chart) the overall trend is neutral to bullish while in the short-term, sustained trading above 131.00 should keep the bullish view in play.
