- EURJPY confirmed a near-term bearish breakdown and dropped to two-month lows earlier this week.
- The set-up favors bearish traders and supports prospects for further near-term weakness.
- Any attempted recovery back above 123.20 area is likely to remain capped near the 124.00 handle.
- The pair seems vulnerable to extend the downfall and aim to test sub-121.00 levels or 200-day SMA.
It’s Throwback Thursday and time to revisit out bearish EURJPY call initiated on September 19th. The pair broke through important horizontal support near the 124.40-30 area and dived to two-month lows, around mid-122.00s earlier this week.
The mentioned region is closely followed by confluence support near the 122.25 region – comprising of 100-day SMA and the 61.8% Fibonacci level of the 119.31-127.07 strong positive move. This should now act as a key pivotal point for short-term traders.
Meanwhile, RSI (14) on the daily chart has moved on the verge of breaking into the oversold territory and warrants some caution for bearish traders. Hence, it will be prudent to wait for some near-term consolidation or a modest bounce before positioning for any further depreciating move.
That said, a convincing breakthrough will set the stage for an extension of the downward trajectory and drag the pair towards the 121.45-40 horizontal support. The bearish slide could further get extended towards testing sub-121.00 levels – support marked by the very important 200-day SMA.
On the flip side, any meaningful recovery beyond the 50% Fibo. level, around the 123.20 region, might still be seen as a selling opportunity. This, in turn, should cap the upside near the 124.00 mark, which nears the 38.2% Fibo. level and should act as a key barrier for bulls.