EUR/JPY entered a free fall mode today, breaking below the key support zone between the 134.30 level, which acted as a key support between April 5th and 8th, and the 134.75 barrier, which is marked by the low of April 27th. In our view, this has turned the near-term technical outlook bearish and thus, we would see decent chances for further declines.
We believe that the bears will soon challenge the 132.30 support, marked by the low of March 23rd, the break of which could aim for the 131.35 hurdle, defined as support by the low of March 21st. If the bears are not willing to stop there either, then we may see them extending the fall towards the 130.05 barrier, marked by the inside swing high of March 15th.
Shifting attention to our short-term oscillators, we see that the RSI fell below its 30 line, stays well below that line, and continues to point south, while the MACD lies below both its zero and trigger lines. Both indicators detect strong downside speed and support the notion for further declines in this exchange rate.
We will abandon the bearish case and start examining whether the bulls have gained some control, if we see a strong recovery back above the 136.50 zone, which acted as a key support April 29th and May 4th. This could allow advances towards the 138.35 barrier, marked by the high of May 9th, the break of which could carry extensions towards the psychological round figure of 140.00, marked by the high of April 21st.
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