EURJPY edged higher in the previous five trading days, while it yesterday recorded a sixteen-and-a-half-month high of 128.82. The price has been consistently above the 50- and 200-day moving averages (MAs) since late April.
The positive alignment when the Tenkan-sen line (red) crossed above the Kijun-sen (blue) earlier this week is hinting to a positive near-term bias. However, it should be noted that the Kijun-sen is flat at the moment, perhaps suggesting that the bullish momentum has lost its steam. The RSI indicator is projecting a similar picture, as it is on the one hand well into bullish territory at 72, but on the other hand it is currently trending downwards from overbought levels.
Yesterday’s high of 128.82, combined with the 129.00 handle, are likely to form a resistance area on the upside. A successful break above this area, would divert attention to the 130.00 level, a psychological level that could potentially act as a barrier to further up movements. A more sustained rally is likely to follow should the price climb above 130.00.
On the downside, another potential psychological level, namely the 127.00 mark, might act as support. Further down, additional support could come from the Tenkan-sen, currently at 126.23.
Looking at the medium-term outlook, it looks bullish at the moment with the price comfortably above the 50- and 200-day MAs. Moreover, both MAs are currently upward sloping, albeit the 200-day is only moderately positively sloped. Also, the considerable divergence between the price and the 200-day MA could be a sign of an overextended rally
