The EUR/JPY pair is showing increasing signs of reversing its medium-term uptrend, threatening to enter a new downtrend phase. Key technical indicators and levels suggest that bearish momentum is gaining traction, with critical support levels in focus.
Key Technical Highlights:
- Potential Trend Reversal:
- A confirmed break below 163.21 (November 8 low) would signal the completion of a medium-term uptrend reversal.
- This would favor further downside, aligning with the principle that “the trend is your friend.”
- Next Support Levels:
- 162.17: The 50-day Simple Moving Average (SMA) stands as the next likely support, acting as a potential target for a deeper decline.
- Below that, additional support could emerge around 161.50, a key psychological and historical level.
- Momentum Analysis:
- The Relative Strength Index (RSI) is plateauing near the neutral 49 level, which highlights indecision but leans bearish.
- A dip below 45 on the RSI would likely confirm the onset of bearish momentum.
- Resistance Levels to Watch:
- Upside recovery would need to clear immediate resistance at 164.50, a recent swing high, to challenge the broader bearish narrative.
- Further resistance is seen at 165.00, aligning with the 20-day EMA.
Outlook:
The EUR/JPY pair is precariously positioned, with a potential break below 163.21 likely to pave the way for extended downside to 162.17 and beyond. While the RSI and price action suggest increasing vulnerability, confirmation of the trend reversal hinges on whether sellers can maintain pressure below the 50-day SMA. Bulls would need a decisive rebound above 164.50 to negate the bearish outlook.
Strategy:
- Bearish traders: Look for a confirmed break below 163.21 for short positions, targeting 162.17 and 161.50.
- Bullish traders: Wait for a rebound above 164.50 to validate a continuation of the broader uptrend.