EUR/JPY and GBP/JPY have been in a sharp bearish correction in December into the new year and don’t show any signs of slowing down just yet. However, when we examine the daily charts, we can see some areas to monitor for support. The JPY is likely in a bullish correction and not in a bullish trend, so even though EUR and GBP area not bullish, the EUR/JPY and GBP/JPY pairs should find support for a consolidation if not a bullish continuation attempt.
After marking a 2014-high at 149.55, EUR/JPY has been retreating rapidly. Last week, after a few strong bearish candles, there were a couple of weak bullish ones, followed by an engulfing bearish candle that is now threatening the 140.00 handle. The candlestick combination signal bearish continuation into a key area around 140. Note that the 61.8% retracement of the Oct-Dec. rally is around 140. Price is also testing the 200-day SMA, while the daily RSI reading is in oversold territory. If the market is in a bearish trend, the oversold RSI reading would not matter much, but EUR/JPY has been bullish since 2011, so it should be respected.
Now, it is premature to call any bullish outlook at the moment. A break above 142 can introduce the bullish scenario. To the downside, there is still risk towards 138 down to the 78.6% retracement level of 137.43.
The GBP/JPY is in a similar set up. The candlestick action also signals bearish continuation.
It is now testing the 100-day SMA, and the 50% retracement level at 178.86. The RSI is just around the oversold area. In the coming week, we should monitor this 178-179 area. If price can hold and come back above a key resistance last week at 181, then we can consider a bullish outlook. Otherwise, there is still bearish risk towards the 176.30, 61.8% retracement level down to the 176. handle, where the 100-day SMA resides at the moment.
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