EUR/JPY edged higher to 134.48 last week but failed to sustain above 134.39 resistance and retreated sharply. Initial bias remains neutral this week with focus on 131.65 support. Decisive break there will confirm rejection from 134.20 fibonacci level. That will also complete and double top pattern and confirms near term reversal. 55 day EMA will also be firmly taken out. In that case, deeper decline should be seen back to 127.55 key support. Meanwhile, decisive break of 134.39/48 resistance zone will confirm up trend resumption. In such case, EUR/JPY should target 141.04 long term resistance.
In the bigger picture, medium term rise from 109.03 (2016 low) is seen as at the same degree as the down trend from 149.76 (2014 high) to 109.03 (2016 low). 61.8% retracement of 149.76 to 109.03 at 134.20 is already met. Sustained break there will pave the way to key long term resistance zone at 141.04/149.76. However, break of 127.55 support will argue that the medium term trend has reversed and will turn outlook bearish for deeper fall.
In the long term picture, at this point, there is no clear indication that rise from 109.03 is resuming that from 94.11. Hence, we’d be cautious on topping below 149.76 to extend range trading. Nonetheless, firm break of 149.76 will indicates strong underlying buying. In such case, EUR/JPY will target 100% projection of 94.11 to 149.76 from 109.03 at 164.68.
