EUR/JPY traded slightly higher during the European morning Friday, after it hit support at 122.27. That said, although the price structure remains higher peaks and higher troughs since June 21st, overall, the pair continues to trade within the wide sideways range that’s been containing the price action since May 22nd, between 120.78 and 123.15. Thus, for now, we will hold a flat stance and wait for the pair to emerge above the range’s upper bound before getting confident with further advances.
The pair could continue trading slightly higher from current levels, but as we noted above, we prefer to wait for a break above 123.15, the range’s upper bound, before we start examining whether the picture has gotten brighter. Such a break could initially pave the way towards the peak of May 21st, at around 123.75, the break of which could carry more bullish implications, perhaps setting the stage for the 124.25 zone, marked by the high of May 7th and slightly below the peak of the day before.
Turning our gaze to the short-term oscillators, we see that the RSI rebounded from slightly above its 50 line, but the MACD, although positive, still lies below its trigger line. Both indicators detect upside momentum, but the fact that the MACD is still below its trigger enhances our choice to wait for an upside exit out of the range before we assume that the outlook has turned positive.
On the downside, a dip below 122.27 would also bring the rate below the upside support line drawn from the low of June 21st and may signal that traders want to keep this pair range bound for a while more. EUR/JPY could then travel south, towards Tuesday’s low, near 121.64, where another break may allow the slide to continue towards 120.95, or the lower end of the aforementioned range, at 120.78.
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