EUR/JPY traded lower today, but hit support at 126.10, near the upside support line drawn from the low of January 18th, and then it rebounded somewhat. That said, now the rate is drifting somewhat lower again. Overall, despite the latest slide, the rate remains above the aforementioned upside line, and thus we will take a neutral stance and wait to see whether this line will provide ground for a rebound, or whether it will break.
A clear rebound back above 126.50, may signal that the recent decline was just a correction and that the bulls are back into the game. We may initially see a test of Tuesday’s high, at 126.83, the break of which could target Monday’s peak, at 127.05. Another break, above 127.05 could set the stage for the 127.34 zone, marked by the high of January 29th.
Shifting attention to our short-term oscillators, we see that the RSI lies below 50 and points slightly down, while the MACD runs below both its zero and trigger lines. Both indicators suggest that the price momentum is still to the downside, but as long as the rate remains above that upside line, we prefer to maintain our wait-and-see stance.
In order to start examining whether the bears have gained full control, we would like to see a clear dip below 126.10. This will also take the rate below the upside line and may initially pave the way towards the 125.70 level, or the 125.60 hurdle, marked by the low of January 27th. If that barrier is not able to stop the bears, then a break lower may pave the way towards the low of January 20th, at 125.27.
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