EUR/JPY traded lower on Monday, breaking below the key support (now turned into resistance) territory of 130.70. Subsequently, the rate tumbled, moved below 130.15, to pause slightly above the 129.80 area, which proved a good resistance from the 30th of August until the 13th of September. The rate is trading below the prior upside support line drawn from the low of the 15th of August, and also below a new short-term downtrend line taken from the high of the 26th of September. So, having these technical signs in mind, we would consider the near-term outlook to have shifted to the downside.
If the bears are able to maintain their momentum and manage to drive the battle below the 129.80 zone, then we may see them extending the slide towards our next support area of 128.90. Another dip below that zone could carry more bearish implications and perhaps pave the way towards the 128.00 territory, slightly above the low of the 10th of September.
Taking a look at our short-term oscillators, we see that the RSI drifted lower and just touched its toe below its 30 line, while the MACD, already negative, has moved back below its trigger line. These indicators suggest negative momentum and corroborate our view for further declines.
That said, even if we see the rate recovering back above 130.15, as long as it stays below the short-term downtrend line, we would still see a negative picture. We would turn flat if we see a decent move above the crossroads of that line and the 130.70 level.
Now in order to start examining the bullish case, we would like to see a clear break above 132.00. Such a move could confirm the pair’s return above the upside line drawn from the low of the 15th of August and is likely to initially aim for the 132.45 resistance. Another break above 132.45 could encourage the bulls to put the key resistance zone of 133.10 on their radar, which held the price from moving higher from the 21st until the 26th of September.
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