EUR/JPY bullish correction still at risk, GBP/USD capped by 50-day SMA

EUR/JPY bullish correction still at risk

EURJPY has been in the green every single day since the plunge to an almost three-month low of 133.39 and the creation of a bullish hammer candlestick last week, rising gradually up to 137.91 on Monday.

The short bullish sequence, however, has not shifted the bias clearly on the positive side yet as the RSI remains below its 50 neutral mark and the MACD is still trying to overcome its red signal line in the negative area.

The 20-day simple moving average (SMA) is currently viewed as the primary threat to the recovery at 138.20. If it successfully rejects the bulls, pressing the price below 137.00, the spotlight will shift back to the 135.00 support region, where the pair found a strong footing last week. Another violation at this point could retest the key constraining zone around 133.15 and the lower boundary of the bearish channel around 132.70.

In the event the pair climbs above the 20-day SMA, the bullish wave could pick up steam towards the 50-day SMA and the channel’s upper trendline at 140.00. A close above that wall would question the short-term bearish trajectory, though only a rally above the 141.00 and 142.00 psychological marks could clear the way towards the 7½-year high of 144.26.

Summarizing, despite the latest bullish correction, EURJPY has not entirely eliminated negative risks while trading within a downward-sloping channel. For that to happen the pair will need to cross above the 20-day SMA at 139.19 and then speed above the channel to upgrade the short-term outlook. 

GBP/USD capped by 50-day SMA as rebound falters

GBPUSD has been in a prolonged downtrend since the beginning of the year, creating a clear structure of lower highs and lower lows. Although the pair managed to faintly bounce back after its downfall halted at the 28-month low of 1.1760, the price has been repeatedly held down by the 50-day simple moving average (SMA) in the last few daily sessions.

The momentum indicators reflect a cautiously negative tone. Specifically, the stochastic oscillator is descending near its 20-oversold area, while the RSI remains below its 50-neutral mark after its recent slump.

To the downside, bearish moves could initially stall at the recent low of 1.2000, which is also considered a crucial psychological mark. Sliding beneath that floor, the spotlight could turn to the June support of 1.1930. A violation of the latter may open the door for the 28-month low of 1.1760.

Alternatively, should the price jump above its 50-day SMA, immediate resistance could be encountered at the recent peak of 1.2290. Conquering this barricade, the bulls might aim for 1.2400 before the May high of 1.2666 comes under examination. Even higher, the pair could ascend to test the 1.3000 psychological mark.

Overall, GBPUSD’s short-term picture is likely to deteriorate even further as the descending 50-day SMA appears to be a tough resistance barrier for the bulls. For the recent rebound to resume, the price needs to decisively cross above the 1.2290 ceiling.

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