EUR/JPY fell yesterday after the Fed appeared more hawkish than expected, and continued to tumble today during the European session as well. On the 4-hour chart, the price structure is of lower highs and lower lows below the downside resistance line drawn from the high of June 1st, and that’s why we will consider the short-term outlook to be negative.
At the time of writing, the pair is testing the 132.02 support, marked by the low of May 13th, but if the bears stay in the driver’s seat, they could overcome it very soon and target the low of May 12th, at 131.65. A break below that hurdle as well could carry larger bearish implications and perhaps pave the way towards the low of May 5th, at 131.00. If that barrier doesn’t hold either, then the next support to consider may be at around 130.55, marked by the low of April 27th.
Taking a look at our short-term oscillators, we see that the RSI lies below 30, while the MACD runs below both its zero and trigger lines, pointing south. Both indicators detect strong downside speed and support the notion for further declines in this exchange rate.
Now, in order to totally abandon the bearish case and start examining whether the outlook has brightened again, we would like to see a strong recovery back above 133.62, a key zone that prevented the rate from moving higher between June 9th and 16th. Such a move would also take EUR/JPY above the aforementioned downside line and may initially target the 134.05 territory, which provided resistance from May 27th until June 2nd. If that obstacle doesn’t hold either, then we could see the bulls sailing north, towards the 134.80 area, defined as a resistance by the high of February 8th, 2018.
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