EUR/JPY had a bearish start on Wednesday, approaching the mid-level of the Bollinger Band (20-simple moving average) in the 4-hour chart, after the pullback on the three-week high of 123.15. The RSI and the MACD are suggesting a possible overstretched market as both are returning lower. The MACD is heading below the trigger line in the positive territory, while the RSI is pointing down below 70 level.
In case the pair continues its short-term direction to the downside, the bears will probably challenge the 122.55 support before heading towards the 23.6% Fibonacci retracement level of the down leg from 126.80 to 120.77, around 122.20, which overlaps with the 40-SMA and the lower Bollinger band.
Alternatively, advances may drive the pair towards the 38.2% Fibonacci of 123.10 and the three-week high (123.15). A significant violation of this barrier could increase this month’s upside rally towards the 123.75 resistance, identified by the peak on May 21.
Briefly, the pair switched to positive mode after the rally off 120.77. However, a run above the 61.8% Fibonacci (124.50) could switch the medium-term negative outlook to bullish. In case of a failed attempt to surpass the upper Bollinger band, the bias could turn bearish again.
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