EUR/JPY Weekly Outlook

EUR/JPY dropped to as low as 124.61 last week but formed a short term bottom there and recovered. Initial bias is neutral this week for some more consolidation. In case of another rise, upside should be limited by 128.94 support turned resistance to bring reversal. On the downside, , below 126.29 minor support will bring retest of 124.61 first. Break will resume whole fall from 137.49 and target next medium term fibonacci level at 119.90.

In the bigger picture, the case of medium term trend reversal continues to build up. That is rise from 109.03 (2016 low) could have completed at 137.49 already. This is supported by bearish divergence in daily MACD and firm break of the medium term channel support. Focus is now on 124.08 resistance turned support. Decisive break there will confirm this bearish case and target 61.8% retracement of 109.03 to 137.49 at 119.90 and below. This will be the preferred case as long as 128.94 support turned resistance holds.

In the long term picture, at this point, EUR/JPY is staying in long term sideway pattern, established since 2000. Rise from 109.03 is seen as a leg inside the pattern. As long as 124.08 support holds, further rally is in favor in medium to long term through 149.76 high. However, break of 124.08 could extend the fall through 109.03 low instead.

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