Yesterday, EUR/JPY broke below its short-term upside support line drawn from the low of July 14th, and today, the pair moved strongly below one of its key support areas, at 125.34, marked by the low of August 18th. The rate also continued its freefall below the 124.87 hurdle, which marks an intraday swing low of August 11th. All this paints a slightly bearish picture and increases the chances for EUR/JPY to drift further south, at least in the near term.
A further decline may bring the rate closer to the 124.28 zone, marked near the lows of August 4th and 8th. The pair might stall there for a bit, or even correct slightly higher. That said, if EUR/JPY remains either below the 124.87 hurdle, or the 125.34 area, this could result in another slide, possibly leading the pair back to the 124.28 zone. If this time it fails to provide support and breaks, that would confirm another forthcoming lower low and may send the rate to the 124.00 area, or even to the 123.33 level, marked by the low of July 30th.
Looking at our oscillators, the RSI and the MACD, we can see that both are pointing lower. In addition to that, the RSI remains below 50 and the MACD is sitting below zero and its trigger line. All this shows a rising downside momentum, which supports the above-discussed scenario.
On the other hand, if the rate jumps back above the aforementioned upside line, that may spook the bears from the field and allow more bulls to join in. EUR/JPY may then travel to the 126.10 barrier, marked by the high of August 18th, which could temporarily stall the acceleration. That said, if the bulls are still feeling comfortable, a break of that barrier might clear the path to the 126.46 obstacle, or even the 126.75 level, marked by the current highest point of August.
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