Lowest Since June 2013: EUR/JPY has been bearish, sliding to a low on the year at 126.09 about a week ago. This was the lowest the pair has seen since June 2013. Since this low, price action appears to be setting up a price bottom for a bullish correction. Let’s take a look at this price action starting with the 4H chart.
Bearish Technicals: The 4H chart still shows a bearish market for the most part. Price is still below the 100-, and 200-period simple moving averages. Price is holding under 128.76, which was the support area of a previous period of consolidation. Furthermore, the RSI has held under 60 after it tagged below 30, which reflects maintenance of at least April’s bearish momentum.
Bullish Attempt: Now, even though the overall technical picture is bearish, examination of price action suggests some further bullish correction. Note that the bullish candles since the 126.09 low have been much more aggressive than the in-between bearish candles. As we wind down the 4/21 US session, the market seems to stick with support at 127.50, which confirms a small price bottom. EUR/JPY is now testing the 128.76 resistance as the 4/21 session winds down.
Room within Downtrend: In the daily chart, we see that there is some room to rally within the context of a bearish market. Above 128.76, EUR/JPY would also break above a falling speedline and open up the 131.35-131.50 area, which involves the 50-day SMA, another falling speedline, and a previous resistance.
We should expect resistance here in this 131.35-131.50 area especially if the daily RSI is around 60. From there, we can expect a bearish attempt towards the 127.50 pivot. If this bearish continuation attempt materializes, there is downside risk towards a key support pivot in 2013 around 125.
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