EURJPY has reversed sharply lower, having rallied above the 61.8% Fibonacci retracement level of the January-March downtrend only a week ago. The sell-off continues today, with prices tumbling below the 23.6% Fibonacci of 117.71.
According to momentum indicators, the selling pressure is likely to persist in the near term as the RSI is trending lower in bearish territory, while the MACD has just turned negative and is attempting to cross below its red signal line.
The bearish bias means EURJPY could soon be revisiting the 117 region, with a slip below this proven support likely to shift attention to the lower Bollinger band, currently at 116.56. If the lower Bollinger Band is unable to halt the decline, the pair is likely to make another run for the 6-month low of 116.11 set on March 9, risking a breach of the 116 handle.
Should prices drop below 116, this would reinforce the medium-term bearish picture, as confirmed by the recent death cross between the 50- and 200-day moving averages (MA).
However, if prices recoup some lost ground and avoid a daily close below the 23.6% Fibonacci, this could help ease the downside pressure and set the stage for a recovery. For any meaningful rebound to take place though, prices would have to first climb towards the 38.2% Fibonacci of 118.69 to then make their way into the upper Bollinger band above the 20-day MA.
Higher up, the next target would come at the 50% Fibonacci of 119.49, which coincides with the 50-day MA. Breaking above this resistance area would turn the focus to the upside, switching the medium-term outlook to neutral and making it possible to re-challenge the March top of 121.13.
