The EUR/JPY pair is trading in a rising channel since marking a low on the year around 126.09. The 4H chart shows the market rallying above the 200-, 100-, and 50-period simple moving averages (SMAs), which are shifting from a declining slope to a flat one. The RSI has cleared above 60. This shows a market that has lost the bearish bias and momentum.
Now, as we start the week the market is a little bit flat, but holding above 129, which gives it a bullish bias. Even if EUR/JPY slides, as long as it holds above 128.50, the bullish channel would be intact and thus the pair would be bullish. Now in order to revive the bearish picture, the pair will have to break below the support/resistance pivot at 127.50. That would put pressure on the 126-126.10 area with risk of falling further and extending the prevailing downtrend, which we can see in the daily chart.
Now, while the downtrend is intact in the daily chart (based on price action, moving averages and the RSI), we do see deceleration. There is a 3-pt bullish divergence between price and the RSI. This is not a good sign of reversal, but does warn us to be ready for one since bears are taking their feet off the pedal.
A break above 131 would introduce some more bullish consideration because it would clear a falling trendline and the 50-day SMA. If the RSI also pushes above 60, that would be a sign that EUR/JPY is in consolidation or bullish correction.
Still, the market might have to break above 133 in order to extend the bullish outlook to the medium-term. For now, any bullish outlook should be limited in the short-term. In fact, for now, we should respect that resistance around 131, and see a break below 128.50 (and the rising channel support in the 4H chart) as an early sign of bearish continuation.
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