EURJPY started the new month on positive note, propelling its three-day bullish run above the restrictive 50-day simple moving average (SMA) and to one-month high of 130.34.
The steep upside move in the RSI, which is fluctuating comfortably above the 50 neutral mark, is promoting more progress in the near term. However, the recent bullish pressures in the price were not firm enough to push the red Tenkan-sen line above the blue Kijun-sen, while the Stochastics is also signaling some caution as the indicator is already within the overbought area and marginally below its previous highs.
The 38.2% Fibonacci retracement of the 134.11 – 127.92 down leg is currently under the spotlight around 130.29. A decisive close above this bar could see a continuation towards the 50.0% Fibonacci of 131.00, while a break above the Ichimoku cloud at 131.32, which overlaps with the dashed tentative descending trendline, may open the door for the 61.8% Fibonacci of 132.15.
If the price pulls below the 130.00 number and the 50-day SMA, the 23.6% Fibonacci of 129.39 could immediately add some footing. The presence of the 20- and 200-day SMAs in the region, which have recently bearishly intersected each other, questioning the case of a trend improvement in the market, is suggesting that any violation at this point could develop into a sharper decline. If true, the sell-off could ramp up towards the 128.30 – 127.92 zone. Beneath that, the pair could create a new lower low at 127.30.
Summarizing, EURJPY is trading bullish in the short-term picture, but its recent upside correction is still looking fragile as the price is flirting with a key barrier. A sustainable move above the 130.00 level could limit fears of a downside reversal.