EUR/JPY continued its steep rally yesterday, and today, it managed to poke its nose above the 132.70, a resistance market by the high of June 23rd. Overall, the pair has been in an uptrend mode since October 6th and is now trading well above the upside support line drawn from that low. Therefore, we would consider the short-term outlook to be positive.
We believe that the break above 132.70 may have opened the way towards the 133.60 territory, which provided strong resistance between June 9th and 16th. The bulls may decide to take a brake after testing that zone, thereby allowing the rate to correct lower. However, as long as it would be trading above the aforementioned upside line, we would see decent chances for another leg north. The forthcoming positive wave could result in a break above 133.60, a move that may open the path towards the high of June 1st.
Shifting attention to our short-term oscillators, we see that the RSI lies well above 70 and points up, while the MACD runs above both its zero and trigger lines, pointing north as well. Both indicators detect strong upside speed and support the notion for further advances in this exchange rate.
On the downside, we would like to see a slide back below 131.30 before we start examining a potential bearish reversal, as such a move may confirm the break below the pre-mentioned upside line. The bears may then get encouraged to push the action towards the 130.75 or 130.50 levels, defined by the low of October 12th and the inside swing high of September 29th respectively. If neither of those two barriers is able to halt the slide, then we could see the fall extending towards the round figure of 130.00, which is slightly above the inside swing high of September 30th.
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