EURJPY stood firm again around the 135.00 support region on Tuesday, which triggered the preceding bullish wave, increasing hopes that the latest bearish correction has found a bottom.
The tough 20-day simple moving average (SMA), however, is still overhead, keeping downside risks alive at 137.20, while the 38.2% Fibonacci of the 124.38 – 144.26 upleg also seems a struggle to overcome today as it lies slightly lower at 136.67.
In other discouraging signs, the RSI and the MACD, although having pivoted northwards, remain within the negative area, with the former below its 50 neutral mark and the latter attached to its red signal line below zero.
Unless the bulls sustain their strength above 137.20, the price could flip back to test the 135.00 base. Failure to bounce here this time may initially see an extension towards the 50% Fibonacci of 134.32 and the 200-day SMA, and then a continuation towards the key constraining zone of 133.15 -132.70. Should selling pressures persist at this point, all eyes will turn to the channel’s lower boundary at 131.86.
In the bullish scenario, where the pair finally closes above the 20-day SMA, the first obstacle could pop up around 138.20. A decisive step higher may run until the channel’s surface and the 50-day SMA at 139.42, where the 23.6% Fibonacci is also positioned. Beyond that, the 140.00 psychological mark, which halted April’s upside sequence, could immediately block the way towards the 141.00 and 142.00 round levels.
Summarizing, EURJPY seems to have set the stage for its next upside reversal, though whether it will be successful may depend on the restrictive 20-day SMA.