EUR/JPY traded higher during Asian trading Thursday but hit resistance at 133.10 during the European morning and then it retreated. The pair continues to trade above the uptrend line drawn from the low of the 22nd of March and thus, we believe that the short-term outlook remains positive.
A clear and decisive break above 133.10, a resistance also marked by the peaks of the 16th and 21st of February, may signal the continuation of the short-term uptrend and is possible to trigger extensions towards our next obstacle of 133.75, defined by the high of the 12th of February.
Shifting attention to our short-term momentum indicators, we see that the RSI has turned down after it hit resistance slightly below 70, while the MACD, although above both its zero and trigger lines, shows signs of flattening. What’s more, there is negative divergence between the RSI and the price action. These momentum signs suggest that further downside correction may be on the cards before, and if, the bulls decide to take the reins again, perhaps for another test near 132.45.
Even if that barrier does not hold the rate from falling further, EUR/JPY would still be trading above the short-term uptrend line. We would still see a decent likelihood for the bulls to jump in near the crossroads of that line and the 132.10 support. A decisive dip below 132.10 and the uptrend line is needed before we start examining the case of a near-term trend reversal.
Article written by Charalambos Pissouros, Senior Market Analyst at JFD Brokers