We have been observing this strong rally in the EUR/JPY since the pair reversed to the upside on the 29th of May. This steep uprise managed to place the pair back above the upwards moving trendline, drawn from the 18th of August last year. Certainly, this could be seen as positive and we could see the bulls driving EUR/JPY higher. One thing to note is that the pair is still below its long-term downwards moving trendline, running from the 2nd of February, so the upside could be limited.
For now, we will stick to the upside potential, at least in the short run. A strong move back above the 129.80 level could open the path towards the next key area of resistance at 130.20. If more buyers start joining in, then EUR/JPY could travel all the way to the 131.20 or even the 131.40 levels, where the pair could also meet the aforementioned downwards moving trendline and test it from underneath.
Alternatively, if EUR/JPY decides to make a move back below the previously mentioned upwards moving trendline, then this could worry the buyers, who could step away for the time being. The bears could take control and drive the pair towards the 129.00 level, where EUR/JPY could meet the tentative upwards moving support line, taken from the lows of the 29th of May. Certainly, EUR/JPY could bounce back up from there, but if that support area doesn’t hold, then this could open the path towards the 128.55 zone, or even lower to the 127.80 mark.
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