EUR/JPY dropped sharply to as low as 118.62 last week as the decline from 122.88 resumed. Further fall is expected but overall, price actions from 124.08 are still viewed as a consolidation pattern. Hence we’re expecting strong support from 118.39/45 to contain downside. Medium term rise from 109.20 should extend higher. But sustained break of 118.39/45 will indicate medium term reversal.
Intraday bias in EUR/JPY stays on the downside this week. At this point, we’d still expect strong support from 118.45 key cluster support level (38.2% retracement of 109.20 to 124.08 at 118.39) to contain downside and bring rebound. On the upside, break of 119.81 resistance will indicate short term bottoming. In such case, intraday bias will be turned back to the upside for 120.43 resistance first. However, sustained trading below 118.39/45 will invalidate our view and bring deeper fall.
In the bigger picture, we’re holding on to the view that medium term rise from 109.20 is still in progress. Focus is on 126.09 key resistance level. Sustained break will confirm completion of the whole decline from 149.76. And rise from 109.20 is of the same degree as the fall from 149.76. In such case, further rally would be seen to 104.04 resistance and possibly above before topping. Meanwhile, rejection from 126.09, or firm break of 118.45 cluster support, will likely extend the fall from 149.76 through 109.20 low.
In the long term picture, medium term decline from 149.76 is seen as part of a long term sideway pattern from 88.96. Decisive break of 126.09 will indicate that such decline is completed and EUR/JPY has started another medium term rally already. Before that, deeper fall is mildly in favor towards 94.11 low. Overall, long term rang trading will continue.