EUR/JPY Bullish Retracement Opportunity

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EURJPY recently busted through the resistance at the 131.00 major psychological mark and reached highs around 133.60. Price looks ready for a pullback to the area of interest which lines up with the Fibonacci retracement levels.

The 61.8% level is around 130.30 and in line with the 200 SMA dynamic inflection point while the 50% level is at 130.93. A shallow correction could already find buyers at the 38.2% Fib near the 131.50 minor psychological mark. If any of the Fibs hold as support, EURJPY could resume the climb to the swing high and beyond.

The 100 SMA is above the 200 SMA to confirm that the path of least resistance is to the upside or that support is more likely to hold than to break. The gap between the indicators is widening to reflect strengthening bullish momentum.

Stochastic is already on the move up, so price could follow suit while buyers are in control. RSI is on the move down, on the other hand, so the correction could keep going until oversold conditions are met.

There are no major reports due from both the eurozone and Japan today, so this pair might take cues from risk sentiment instead. US earnings report have been driving market risk appetite lately, and another round of upbeat figures could weigh on safe-haven assets like the lower-yielding yen.

The BOJ has its monetary policy decision coming up, and no actual changes to interest rates and bond purchases are eyed. Instead the Japanese central bank might give a dovish statement, citing that they would likely keep stimulus in place for a while while the economy recovers from the pandemic.

The ECB also has its monetary policy decision lined up later in the week and would likely keep monetary policy unchanged as well. Traders are keen to get more hints on what the central bank plans to do after the PEPP expires early next year.

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