EURJPY rallied considerably, breaking above the Ichimoku cloud, after reaching 2 ½ -month lows at 124.89 on August 15. On Wednesday, though, the rally somewhat stalled, with the RSI in the 4-hour chart suggesting that weakness could persist in the short-term; the RSI exited overbought levels to steady slightly below 70. The red Tenkan-sen line and the blue Kijun-sen line have both flattened, painting a neutral short-term picture.
In case the market extends losses, the price could head lower until it reaches the 20-period simple moving average currently at 129.56, pausing marginally above the lower bound of the ascending channel. Should traders continue to sell the euro, sending the pair out of the channel, negative corrections may strengthen beneath the 23.6% Fibonacci of 129.30 of the upleg from 126.24 to 130.26 (August 21-28). Even lower, bears could play with the 38.2% Fibonacci of 128.72. If they manage to pass through that door, the next stop could come at the 50% Fibonacci 128.24 where the market took a small rest between August 22 and 23.
Alternatively, a reversal to the upside could find resistance at the 130 psychological point before the price inches up to touch the middle bound of the channel, currently seen near the almost 1-month high of 130.26 registered on Tuesday. Additional buying interest above from here may open the way towards the 131 key level, bringing the upper line of the channel into view as well.
