EURJPY entered a bear market in the long-term picture, falling harshly below its previous lows to bottom at a 16-month low of 124.38 last week.
While the 20-day simple moving average (SMA) has just created a double bearish cross with the longer-term SMAs, endorsing the negative trajectory in the market, the RSI and the Stochastics are pointing to oversold conditions. The former has pivoted near its 30 support region, while the latter has formed a bullish double bottom pattern around 20, foreseeing some recovery in the coming sessions.
Having bounced from its recent lows, the price is now looking for a break above the 38.2% Fibonacci retracement of the 114.42 – 134.11 upleg (2020 – 2021) around 126.59. If the bulls claim that area, the ascent could continue towards the key 127.35 – 127.80 zone. A clear violation at this point would put the market back in the previous neutral path, likely shifting the spotlight towards the 129.00 round level and the 20-day SMA.
In the negative scenario, the bears are expected to push again for a close below the 125.00 mark. If efforts prove successful this time, with the price retreating below the 50% Fibonacci of 124.26 as well, the next stop could be around 122.83, last seen in November 2020.
Summarizing, EURJPY is gaining some buying traction as its latest aggressive decline seems overdone. A decisive close above 126.59 could strengthen its bullish momentum. Otherwise, the focus will remain on the 125.00 number.
