EUR/JPY dropped sharply to as low as 126.00 last week. The solid break of 127.13 support confirmed our view that corrective rise from 124.61 has completed with three waves up to 131.97. And more importantly, the whole fall from 137.49 is likely resuming. Initial bias remains on the downside this week for 124.61 . On the upside, above 127.38 minor resistance will turn intraday bias neutral first. But recovery should be limited below 128.49 support turned resistance to bring another fall.
In the bigger picture, focus is back on 124.08 key resistance turned support. Decisive break there will argue that whole rise from 109.03 (2016 low) has completed at 137.49. Deeper decline would be seen to 61.8% retracement of 109.03 to 137.49 at 119.90 next. Sustained break there will pave the way to 109.03 and below. Meanwhile, rebound from 124.08 will keep medium term bullishness intact for another high above 137.49.
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.