EURJPY has been in the green every single day since the plunge to an almost three-month low of 133.39 and the creation of a bullish hammer candlestick last week, rising gradually up to 137.91 on Monday.
The short bullish sequence, however, has not shifted the bias clearly on the positive side yet, as the RSI remains below its 50 neutral mark and the MACD is still trying to overcome its red signal line in the negative area.
The 20-day simple moving average (SMA) is currently viewed as the primary threat to the recovery at 138.20. If it successfully rejects the bulls, pressing the price below 137.00, the spotlight will shift back to the 135.00 support region, where the pair found a strong footing last week. Another violation at this point could retest the key constraining zone around 133.15 and the lower boundary of the bearish channel around 132.70.
In the event the pair climbs above the 20-day SMA, the bullish wave could pick up steam towards the 50-day SMA and the channel’s upper trendline at 140.00. A close above that wall would question the short-term bearish trajectory, though only a rally above the 141.00 and 142.00 psychological marks could clear the way towards the 7½-year high of 144.26.
Summarizing, despite the latest bullish correction, EURJPY has not entirely eliminated negative risks while trading within a downward-sloping channel. For that to happen the pair will need to cross above the 20-day SMA at 139.19 and then speed above the channel to upgrade the short-term outlook.
