EUR/JPY rebounds but hits resistance at 128.60

EUR/JPY traded higher yesterday, after hitting support at 127.50. However, the recovery stayed limited near the 128.60 territory, where the rate hit resistance and retreated again. Overall, EUR/JPY continues to trade below the downside resistance line taken from the high of October 29^th, and thus, we will consider the short-term picture to be negative.

If the bears are willing to stay in the driver’s seat, then we could see another test near 127.50 soon. A break lower would confirm a forthcoming lower low and could initially challenge the 127.15 barrier, marked by the inside swing high of February 8^th, where another dip could extend the fall towards the low of the next day, at 126.45. If that hurdle is not able to stop the downtrend either, then we could see the sellers diving towards the 126.10 or 125.60 territories, marked by the lows of February 4^th and January 27^th, respectively.

Turning our gaze to the short-term oscillators, we see that the RSI turned down again after hitting resistance near its 50 line, while the MACD, although negative, still lies above its trigger line. Both indicators detect downside speed, which supports the notion for further declines, but fact that the MACD remains above its trigger line makes us careful over another bounce before the next negative leg.

Nonetheless, in order to start examining the bullish case, we would like to see a strong rebound back above 129.50. The rate will already be above the aforementioned downside line, and we could see a test near the round figure of 130.00 or the 130.20 zone, marked by the high of November 19^th and 12^th, respectively. If the bulls are not willing to stop there, then we could see them targeting the 130.60 obstacle, marked by the high of November 15^th, the break of which could extend the advance towards the peak of November 8^th, at 131.45.