EUR/JPY keeps trading sideways for almost a month now, where it is struggling to stay above the key barrier at 125.15. But given that the pair continues to form higher lows, this adds a bit of a positive spin to the short-term outlook. That said, until we actually get the confirmation break, it would be difficult to state, for sure, that the path holds north, hence why we will take a cautiously-bullish stand for now.
A strong push further up, above the 125.15 could lead towards a test of the 200 EMA, seen on the 4-hour chart. If the rate travels above it, this is when more bulls may start getting excited about the possibility of lifting EUR/JPY even further up. That’s when the pair might reach a strong resistance zone between the 125.85 and 126.10 levels, marked by the high of the 1st of January and the low of the 30th of December, respectively. If the buyers remain in control, EUR/JPY could then target the 127.10 hurdle, which is the high of the 27th of December.
Looking at our oscillators, the RSI is currently above 50 and points to the upside. The MACD continues to run in the positive territory and sits fractionally above its trigger line. Both indicators suggest that the momentum is picking up again, which works in favour of the above-discussed scenario.
Alternatively, we could ignore the upside idea for a while, if the rate drops below the 124.65 hurdle, marked by yesterday’s low. This way, EUR/JPY could fall further, aiming for the 124.15 obstacle, or even the 123.75 support area, which is the low of last week. The pair could bounce back up from that support area, but if the rate fails to drive back up towards the 124.65 hurdle again, we may see another leg of selling. If this time the 123.75 support level surrenders to the bears, EUR/JPY could slide towards the 123.40 obstacle, marked by the low of the 15th of January.
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