EUR/JPY risk skewed to the downside; downtrend in place.
EUR/JPY has fully-reversed this week’s gains, pulling back below its simple moving averages (SMA) on the four-hour chart and back into the 115.00 level.
More importantly, the downside correction confirmed another lower high at 116.85, further enhancing the bearish trend which started early this year, and with the RSI falling below its 50 neutral mark, and the MACD entering the negative zone, expectations are for the sellers to keep the upper hand in the short-term.
The nearest support to keep in mind could be the 115.22 level which coincides with the 23.6% Fibonacci retracement of the downleg from 117.76 to 114.42. If the price fails to hold above that barrier, closing below the 115.00 mark too, the spotlight will turn to the 3 ½-year low of 114.42, while lower, the market could get exposed to a steeper decline towards the 112.00-112.60 zone last seen in 2016.
In the event the pair returns above the 38.2% Fibonacci of 115.73, where the 50-period SMA is also placed, the next target could be the 20-period SMA and the 50% Fibonacci of 116.12. Running higher, the bulls will try to reach the tough 200-period SMA currently at 116.89 if the 61.8% Fibonacci of 116.50 proves an easy obstacle. Yet, only a decisive rally above the 117.76 ceiling could upgrade the short-term outlook to a positive one.
In brief, EUR/JPY could remain under pressure in the short-term, with the 115.22 level viewed as potential immediate support to halt the next decline.
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