EUR/JPY pared some of Tuesday’s losses and re-challenged the 23.6% Fibonacci retracement level of the down-leg from 137.50 to 124.60, around 127.65. The momentum indicators are supportive of the short-term bullish correction, with the RSI flattening into negative, the MACD oscillator approaching the trigger line, while stochastic is moving higher.
If the price successfully surpasses the aforementioned strong obstacle and jumps above the 20-simple moving average in the 4-hour chart, it could hit the 128.50 resistance level. However, should prices climb higher again, above the 40-SMA, the next resistance would likely come from 130.30, as identified by the high on June 14th.
In case of a continuation of the downward movement, price action would likely meet support at the three-week low of 126.60. Slightly below this level, the 126.30 acts as major support. A break below this hurdle as well would drive the pair until the next support of 124.60, taken from the low on May 29.
In the medium term, the bearish outlook remains intact, with the moving averages all pointing downwards in the daily chart and the price holding below the descending trend line since February 1.
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