EUR/JPY made a strong bounce off the channel resistance and might be aiming for the bottom of the channel or the next downside targets marked by the Fib extension levels. The 38.2% extension is near the mid-channel area of interest or the 50% extension at the 126.00 major psychological support.

Stronger selling pressure could take it down to the channel support near the 78.6% extension or 123.50 minor psychological mark. A move below that could take it down to the full extension at 121.70.

The 100 SMA just crossed below the longer-term 200 SMA to indicate that the path of least resistance is to the downside. In other words, the selloff is more likely to resume than to reverse. Also, the 100 SMA dynamic inflection point is close to the channel top to add to resistance in the event of another bounce.

RSI is on the move down so EUR/JPY could follow suit while sellers regain control. Stochastic is also dipping into overbought territory and might be ready to turn lower to draw bearish pressure back in.

Why do I believe the selloff still has more traction? Well, the ECB decision was very disappointing for euro bulls since the central bank simply stated plans to taper asset purchases from 30 billion EUR to 15 billion EUR after September instead of cutting it off completely as many had hoped.

During the presser, Governor Draghi tried to deliver an upbeat assessment of the economy, particularly when it comes to inflation, but failed to draw bulls back in. He did cite uncertainties related to trade and admitted that growth has been weaker than expected recently but mostly due to temporary factors.

When asked about hiking rates, Draghi was vague in answering that rates could stay at current levels until summer next year but didn’t specify a month. Many took this as a sign of caution and a signal to close out long euro positions.