Is EUR/JPY Ready for Another Leg South?

EUR/JPY was in a recovery mode since May 7^th, after finding support the previous day at 114.40. However, yesterday, the advance was stopped by the downside resistance line drawn from the peak of March 25^th, and then, the rate started to retreat. Bearing in mind that the pair continues to trade below the downside line, we would see decent chances for the current retreat to continue.

For that to happen though, the bears will have to overcome yesterday’s low, at 115.95. If they do, then we may see them aiming for the low of April 29^th, at around 115.45. If they don’t stop there, the slide may get extended towards the psychological zone of 115.00. Another break, below 115.00, could allow the bears to continue having the upper hand and perhaps target the low of May 6^th, at 114.40.

Our short-term oscillators suggest diminishing upside momentum, which supports our view for some further retreat in the short run. The RSI runs above 50, but points downwards and appears ready to fall below that equilibrium level. The MACD, although positive, lies below its trigger line and points south as well.

On the upside, we would like to see a strong break above yesterday’s peak of 116.85 before we start examining whether the bulls have stolen the bears’ swords.  The rate would already be above the aforementioned downside line and may climb towards the 117.75 barrier or the 117.95 zone, defined as resistance by the peaks of May 1^st and April 14^th respectively. If the bulls are strong enough to overcome those obstacles as well, then we could see them sailing for the high of April 10^th, at around 118.75.

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