EUR/JPY is at risk of recovering after the steep sell-off of the last two weeks has stalled.
EUR/JPY finds a floor after its steep sell-off. The pair forms a Dragonfly Doji and recovers – a bullish close on Friday would add confidence to bulls. Once the pull back is complete, however, the medium-term downtrend is likely to resume. The EUR/JPY pair reached a low of 164.83 on Thursday – well below its July 11 peak of 175.43. Since then it has been edging higher as the pair recovers from oversold extremes.
Additionally, the Relative Strength Index entered oversold territory on Thursday and if it manages to move back above the oversold zone on Friday it will be a signal that price will probably go higher. If the pair does recover, however, it is likely to be corrective and eventually run out of steam. This is because both the short and medium-term trends are now probably bearish, which given the old saying “the trend is your friend” suggests the bias is to the downside.
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