EURJPY has been underperforming in the past two days, testing the red Tenkan-sen line. When looking at the bigger picture the pair has been in a clear bullish tendency since May 6.
On the daily chart, prices bounced off the 16-month high of 125.60 but based on the technical indicators, momentum is weakening for a further move higher. The RSI indicator is flattening in the positive region, while the MACD slipped beneath the trigger line above the zero level.
If the price continues to move lower, then the focus would shift to the downside towards the 23.6% Fibonacci retracement level of the upward wave from 114.40 to 125.60 at 123.00, which if breached, would increase downside pressure and bring about a reversal of the trend. From here, EURJPY would be on the path towards the 40-day simple moving average (SMA) currently at 122.33 and the 38.2% Fibonacci of 121.32.
If price action remains above the red Tenkan-sen line, there is scope to test the 125.60 resistance. Clearing this key level would see additional gains towards 126.80, identified by the low on April 2019. Rising above it would see prices re-test the 127.50 peak, being the top on February 2017.
Overall, EURJPY has been positive since the bottom at 114.40. Near-term weakness is expected to remain as long as the technical indicators are suggesting downside correction.
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