EURJPY is trapped within the 124-126 area as the 50% and the 38.2% Fibonacci levels of the downleg from 133.21 to 118.57 seem to be keeping price movements under control and within the symmetrical triangle which appeared more clearly after the rebound on the 38.2% Fibonacci last week.
Momentum indicators suggest a neutral-to-bearish bias for the short term as the red Tenkan-sen line continues to move sideways, while the RSI is marginally below its 50 neutral mark but is heading towards the 42 area, where it has tended to bounce off in recent months.
In the negative scenario, the pair could significantly pierce the lower line of the symmetrical triangle to retest the 38.2% Fibonacci of 124.13. A successful break lower and more importantly below the 123.75 support area could potentially strengthen negative momentum towards the January 4 low of 122.38, while under that barrier the 121 key level could also provide support in case of a more dynamic sell-off.
On the upside, the 50% Fibonacci of 125.80 will be closely watched if bullish pressure comes back into play. A more important resistance, however, is expected to arise around 126.34 as any decisive close above that region and therefore above the upper line of the asymmetrical triangle, could bring more buying interest to the market, with the price probably rallying next towards the 61.8% Fibonacci of 127.58.
Turning to the medium-term picture, EURJPY remains bearish as long as it holds below 126.60. A rise above 130 would turn the outlook positive, though, with the 50-day MA distancing itself below the 200-day MA chances for such a move are very low.