EUR/JPY surged during the Asian session Tuesday, and during the European morning it managed to break above the 132.00 key resistance, as well as the neckline of a possible inverted head and shoulders formation. Having this in mind and that the pair looks to be trading above a potential new upside support line, taken from the low of the 5th of March, we believe that the short-term outlook of this pair may have turned positive.
Currently, the rate is trading near the 200-EMA on the 4-hour chart, and if the bulls manage to stay in charge and drive the battle above that EMA, then we would expect them to aim for the 133.00 hurdle, defined by the peak of the 21st of February. A break above that barrier could extend the rally towards our next resistance of 133.40.
Our short-term oscillators detect strong upside speed and corroborate our view that the pair may be poised to continue trading north. The RSI rebounded from near its 50 line and now looks to be heading towards 70, while the MACD lies above both its zero and trigger lines, pointing up.
On the downside, a break below the new upside support line and the neckline of the aforementioned H&S formation could signal that the bulls have abandoned the game and may open the way for the 131.00 support territory, marked by yesterday’s low. Another dip below 131.00 could set the stage for our next support of 130.50.
