EUR/JPY edged north during the European morning Tuesday, breaking above the resistance (now turned into support) hurdle of 131.00. Nevertheless, the rally was stopped by the 131.35 level, a couple of pips below the peak of the 14th of May, and then the rate retreated. In the bigger picture, EUR/JPY is trading above an upside support line drawn from the low of the 18th of August 2017, but also below the downside resistance line taken from the peak of the 2nd of February. Thus, we prefer to adopt a flat stance with regards to the medium-term outlook. That said, in the short-run, the price structure suggests that the bulls could take charge again soon and push the rate a bit higher.
If they manage to seize control from near current levels, then we may see them targeting once again the 131.35 obstacle. A clear break above that resistance could see scope for extensions towards our next hurdle of 131.70, or the downside resistance line taken from the peak of the 2nd of February.
Looking at our short-term oscillators, we see that the RSI, already above its upside support line, rebounded from near its 50 line. The MACD stands above both its zero and trigger lines, pointing up. These indicators detect positive momentum and support the case for the rate to continue drifting north for a while more.
On the downside, we would like to see a clear dip below the crossroads of the 131.00 support and the short-term uptrend line taken from the low of the 16th of May before we start examining whether the bears have taken the driver’s seat, at least in the near term. Such a dip could pave the way for the 130.60 zone, the break of which could carry more bearish extensions, perhaps towards the 130.25 territory, marked by Friday’s low.