EUR/JPY received a lot of buying activity and given the break above the aforementioned downside line, this strength could continue today as well. The next key could be the 131.750 level, the break of which could push EUR/JPY to test the 132.350 mark. If this won’t prevent the pair from moving higher, then the 133 area is another strong potential resistance.
However, taking into account that the latest rally appears overstretched, we stay cautious that small retracement to the downside may occur, before the rate heads higher. A good for a potential bounce higher could be the 131.100 zone.
If the bulls fail to take advantage of that zone and the rate dips below it, they could send the pair back down to the 130.350 mark. However, the rate would still be trading above the aforementioned downside line, and as such we would still consider a decent likelihood for a rebound. A move back below the aforementioned downwards moving trendline is the move that could turn the short-term picture back to the downside. Such a move could pull the pair back to the strong of 129.350.