EUR/JPY entered a recovery mode on Jan. 28, after hitting support near the 128.35 barrier, which has been preventing the rate from falling further since Jan. 25. However, the recovery was stopped near the 129.55 zone, and the rate pulled back. Given that the recovery and, specifically, the break above 129.05 confirmed a forthcoming higher high on the 4-hour chart, we would see decent chances for the bulls to retake charge at some point soon.
A break above 129.55 could confirm the case of some further short-term upside extensions and may initially target the 130.10 barrier, marked by the high of Jan. 20. Another break, above 130.10, could carry extensions towards the inside swing low of Jan. 6, at 130.60, and if the bulls are not willing to stop there either, we could see them climbing towards the high of Jan. 18, at 131.15.
Shifting attention to our short-term oscillators, we see that the RSI turned down after it hit resistance slightly below 70, while the MACD, although above both it is zero and trigger lines, shows signs of topping as well. Both indicators detect slowing upside speed and suggest that some further retreat may be looming before and if the bulls decide to jump back into the action.
However, to start examining whether the outlook has turned back to bearish, we would like to see an apparent dip below 128.35. Such a move would confirm a forthcoming lower low on the 4-hour chart and may initially target the low of Dec. 20, at 127.55, the break of which could extend the fall towards the low of Feb. 10, last year, at 126.63.
