EURJPY paused the downtrend from 134.40 and is making a recovery after a brief dip below 132. Immediate downside pressure has eased but the pair is still at risk for further downside as prices are still within the Ichimoku cloud on the 4-hour chart.
With RSI turning back up, there is room for more upside ahead of round figure resistance at 133. This is close to the top of the cloud and also where the Kijun-sen line currently lies. But only a move above 133.90 would indicate that downside pressure has ended. From this level, EURJPY would re-test the 134.40 peak and then resume the uptrend that started from 129.36 with scope to reach the 135-handle.
If support at 133 fails to hold, then prices would target 131.60 (previous support from early September). Below this, the market would see more weakness and consequently the key psychological level at 130 comes into view as further support ahead of the 129.36 low.
It remains to be seen whether the market is carving out a lower top right now and if the current bounce off 132 is just a corrective move of what could be the start of a new downtrend from 134.40. The odds of another leg lower are still high since short-term momentum oscillators are in bearish territory (both RSI and MACD) and there was a bearish cross of the Tenkan-sen line below the Kijun-sen line on the 4-hour chart.
