EUR/JPY edged higher to 123.18 last week but dropped sharply since then. The development suggests that corrective recovery from 120.78 has completed. Initial bias remains on the downside this week for 120.78 low first. Break will resume larger fall from 127.50 and target 118.62 low next. On the upside, above 122.17 minor resistance delay the bearish case, turn intraday bias neutral and bring more consolidations first.
In the bigger picture, down trend from 137.49 is still in progress with the cross staying inside long term falling channel. Break of 118.62 will extend the fall to 109.48 (2016 low). On the upside, break of 127.50 resistance is needed to be the first sign of medium term reversal. Otherwise, outlook will remain bearish in case of strong rebound.
In the long term picture, EUR/JPY is staying in long term sideway pattern, established since 2000. Fall from 137.49 is seen as a falling leg inside the pattern. Break of 118.62 will extend this falling leg through 109.48 (2016 low). With EUR/JPY staying below 55 month EMA, this is now the preferred case.
