EUR/JPY edged north on Friday, breaking above the tentative downtrend line drawn from the peak of the 26th of September. Then, the rate hit resistance near the 129.30 barrier and subsequently it pulled back. That said, the rate continues to trade above the aforementioned downtrend line, as well as above a new short-term upside line drawn from the low of the 26th of October. So, having these technical signs in mind, we would consider the short-term outlook to be positive for now.
If the bulls are strong enough to take charge again soon and push the rate above 129.30, then we would expect them to set the stage for our next resistance, at around 130.20, defined by the peak of the 22nd of October. Another break above that level could open the path for the 130.70 zone.
Taking a look at our short-term oscillators, we see that the RSI has been drifting lower since it hit resistance near its 70 line, while the MACD, although positive, has topped and fallen below its trigger line. These indicators suggest that some further pullback may be in the works before, and if, the bulls decide to shoot again, perhaps for a test near the crossroads of the aforementioned trend lines, or the 128.35 level.
In order to start examining whether the bulls have abandoned the battlefield, we would like to see a clear break below 128.35 and the prior downtrend line taken from the high of the 26th of September. Such a dip could initially pave the way for the low of the 31st of October, at around 127.65. Another move below 127.65 could carry more bearish extensions, perhaps towards the 126.65 barrier, near the low of the 26th of last month.
