EURJPY is looking for a rebound after confirming a bearish trend reversal pattern and diving as low as 122.36, the weakest price in two months. The RSI and the Stochastics are justifying any attempt to halt selling pressures as both indicators have bottomed out in oversold area and are heading higher. However, the market has yet to correct the bearish cross between the 20- and the 50-day simple moving averages (SMAs) and that keeps some caution about the market trend.
Moreover, the bearish head and shoulder pattern, which has alerted the start of a downtrend, remains intact as long as the price continues to trade below the 124.40 neckline. A close above the 123.00 level, which has been a key barrier to upside moves over the past sessions, could help the price to re-challenge the 124.40 border. If it successfully violates it, climbing above its 20- and 50-day SMAs and the Ichimoku cloud too, the door would open for the 125.60 restrictive region and then for the 126.40 resistance zone.
Failure to close above 123.00, would shift the spotlight back to the 122.00 level, where the 38.2% Fibonacci of the May’s rally is placed around. Retracing lower, the 200-day SMA and the 50% Fibonacci both around 120.75 could be the next target.
Meanwhile in the medium-term picture, the outlook turned neutral following the break below the 124.40 neckline. In brief, EURJPY could recoup some losses in the short term as the market seems to have reached the boundary of the oversold territory. Yet, fears that the downtrend may continue will remain unless the price posts a sustainable move above 124.40.
