EURJPY managed to hold above its recent low of 116.11 this week even though the 121.00 resistance area added some pressure.
The positive performance in the market, however, is not the only good news. More importantly, the pair seems to be forming a double bottom pattern around 116.00 in the weekly chart which could be a bullish signal that the sell-off that started from the 2018 peak of 137.49 may have reached a bottom and it is time for the pair to change direction. A bullish cross between the 50- and the 20-weekly simple moving averages (SMAs) could further encourage a change in direction – if completed in the coming sessions.
In technical indicators, the strengthening fast Stochastics are backing any potential improvement but the RSI and the MACD continue to lack direction near their neutral levels, keeping some caution in the market for now.
To convince traders over a trend reversal, the bulls need to dominate above the 122.86 neckline. Such a move would validate the double bottom formation and send the price towards the 200-weekly SMA, hitting the 38.2% Fibonacci of 124.27 of the 137.49-115.85 downleg too. Above the latter, the pair could gain fresh momentum outside the Ichimoku cloud to meet the 50% Fibonacci of 126.80.
On the flip side, if the 23.6% Fibonacci of 121.15 rejects any correction towards the neckline, the focus will shift back to the 116.00 bottom. Should the bears pierce that floor, and more worryingly close below the 2017 trough of 114.84, the door would open for the 2016 support zone of 112.30-110.80.
Summarizing, a positive double bottom pattern has been detected in the EURJPY weekly chart, though a confirmation of a trend reversal could only come above the 122.86 neckline.
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