EUR/JPY Price Analysis: Retraces from weekly highs near 120 pips, hovers around 127.80s

The EUR/JPY plummets from weekly highs during the North American session amid a sudden risk-off market mood on news reporting that Ukrainian Foreign Minister Dmytro Kubela said that Russia talks had not shown any progress. At the time of writing, the EUR/JPY is trading at 127.89.

Risk-aversion is back again, amid the lack of progress between Russia-Ukraine, as reflected by US equity markets trading in the red. In the FX space, the CHF and the JPY, safe-have peers trade mixed, but the JPY is stronger vs. the EUR due to the Eurozone implications in the conflict.

Overnight, the EUR/JPY bounced off the 127.50 area, rallying towards 129.00 influenced by a pure market sentiment play, once Russian President Putin admitted that talks had taken a positive turn. However, EUR/JPY traders faded the upward move, as depicted by the daily chart, with an “inverted-hammer” with a considerable 110-pip top-wick above the real-body, meaning solid selling pressure drove the pair lower.

EUR/JPY Price Forecast: Technical outlook

The EUR/JPY has remained above the bottom-trendline of a descending channel drawn since August 2021. In fact, it faced strong resistance at 129.00, but nose-dived, breaking on its way, crucial resistance/support levels like January 25 daily high at 128.25. Worth noting that the 50-day moving average (DMA) is about to roll under the 100-DMA, in which case, the DMAs would be in a perfectly bearish order, further cementing the downward bias.  

That said, the EUR/JPY first support would be 127.51, December 20, 2021. Breach of the latter would expose the bottom-trendline of the descending channel around the 126.90-95 area, followed by 125.09, January 18, 2021 low.