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EUR/JPY has been testing the top of the downtrend channel around the area of 143.50.
Despite the corrective move, the pair maintains its bullish momentum. It is currently trading against strong resistance at 143.75. In case there is a daily close above 6/8 Murray, the pair could reach the 144.25 area again.
According to the 1-hour chart, EUR/JPY is trading below the 21 SMA located at 143.16. As long as it keeps trading below this level, it is likely to continue the bearish bias and can reach the 200 EMA at 142.25.
A sharp break below the 200 EMA could accelerate the bearish move and it could reach 5/8 Murray located at 140.62.
The increase in the interest rate in July by the FED could further weaken USD/JPY and the pair could climb to 140.62 (5/8 Murray). Besides, EUR/JPY could reach the level of 146.84 (+2/ 8 Murray).
The strong weakness of the yen could force the Bank of Japan to intervene directly because it could affect the country's economy. On the other hand, an interest rate increase by the BoJ could strengthen the yen and it could fall to the psychological level of 130.00 against EUR. Thus, EUR/JPY could reach 2/8 Murray at 131.25.
In the short term, as long as EUR/JPY remains trading below 6/8 Murray, it could continue its downtrend and we expect it to reach the support zone around the psychological level of 140.00.
Our trading plan for the next few hours is to sell below 143.16 (21 SMA). In case of a pullback towards 143.50 (bearish channel), it will be an opportunity to sell with targets at 142.25 (200 EMA) and 140.62 (5/8 Murray).
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