EURJPY stretched its bearish wave into the new year, tumbling to a three-month low of 138.20 on Tuesday.
Previously, the support trendline drawn from March lows turned into resistance, squeezing the price below the 200-day simple moving average (SMA). While the RSI and the stochastics have yet to confirm oversold conditions, the lower boundary of the bearish channel could soon halt the sell-off around 137.50.
If the above scenario materializes, the price may reverse up to retest the 140.00 mark. A decisive close higher and beyond the 200-day SMA could bring the ascending trendline back under examination near 142.60. Yet only a sustainable extension above the channel and the 50-day SMA at 144.00 would motivate new buying.
In the event the bears enhance their momentum below the channel, the next pivot point could develop around the 136.00 handle. Another negative correction here may take a rest near 134.80 before the way clears for the August low of 133.40.
Summarizing, although the short-term risk is tilted to the downside, EURJPY is currently approaching a key support area, raising hopes for a bullish rotation.
