EUR/JPY set to complete a symmetrical triangle.
EUR/JPY rose above the 50-day moving average (MA) last week but its positive action remained constrained within the symmetrical triangle. The pair is currently completing the triangle pattern and the technical indicators suggest a bullish breakout as the MACD has successfully entered the positive territory after six months, while the RSI seems to be resuming positive momentum above its 50 neutral level. Yet as long as the former holds close to zero and the latter below the 56 resistance, upside corrections may appear in the short term.
Should the price close decisively above the triangle and the 50% Fibonacci of 125.80 of the down leg from 133.21 to 118.57, the rally could pick up steam towards the 61.8% Fibonacci of 127.53, a previous key support area. Crawling higher, the next target could be somewhere between 129.30 and 130, but prior that the bulls should bring down the wall around the 200-day MA (128.15).
In the alternative scenario, the price could shift lower to retest the lower line of the triangle at 125. If efforts prove successful, the way could open towards the 124.13-123.75 region, encapsulated by the 38.2% Fibonacci and the lows registered at the end of January. Beneath that zone, the bears will likely take a break between the January 4 trough of 122.38 and the 23.6% Fibonacci of 122.
Turning to the medium-term picture, EUR/JPY maintains a bearish profile. A strong rally above 130 would switch outlook back to positive, though with the 50-day MA showing no signs of correcting its bearish cross with the 200-day MA, chances for such a move are very weak.
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