Technical Analysis – EURJPY recovery starts to lose steam; 50-SMA holds strong

Anthony Charalambous, XM Investment Research Desk

EURJPY bulls retook control bouncing off the 119.00 handle, which is the 23.6% Fibonacci retracement level of the up leg from 115.85 to 120.00 and where the restrictive 50-period simple moving average (SMA) also rests. The bears’ multiple attempts to breach below the 50-period SMA have been denied and the price seems to have started to adopt a sideways move.

The 100- and 200-period SMAs are nearing a completion of a bullish cross, which supports the short-term developing bullish bias. Furthermore, the momentum indicators concur but reflect the stalling in the positive outlook. The MACD remains in the positive area but below its trigger line, and the RSI is reversing back above the 50-level, pointing upwards.

If the 50-period SMA holds, resistance could initially come at the 120.00 obstacle. Surpassing that level could revive the short-term correction to test the 120.77 resistance level. If the buying interest endures, the price could ascend to face the 121.37 swing high from July 25 and 30.

In the downward scenario, if the bears penetrate below the 50-period SMA and the 23.6% Fibo of 119.00, the uptrend line drawn from September 3 could restrict the fall ahead of the recent swing low of 118.65. If the uptrend line is decisively breached, the 38.2% Fibo of 118.40 could apply some pressure. Moving lower, the 100- and 200-period SMAs could be a tougher challenge before the 50.0% Fibo of 117.93.

Summarizing, the medium-term bearish sentiment could turn neutral above 121.37. For the short-term, a move below 119.00 or above 120.00 would reveal the directional bias.