EURJPY bounced off the bottom of its short-term range around 125.80 and might be setting its sights on the resistance next. Stronger bullish pressure could even spur an upside breakout.

If that happens, EURJPY could be in for a rally that’s at least the same height as the rectangle pattern or 80 pips. Moving averages aren’t giving strong directional clues, though, as the indicators are merely oscillating.

If the resistance holds, the pair could retreat back to the bottom of the range or at least until the middle where the dynamic inflection points are.

Stochastic is heading north, so price could follow suit while bullish pressure is present. However, the oscillator is approaching the overbought region to reflect exhaustion among buyers and a likely return in selling momentum.

RSI also has a bit of room to climb before reaching the overbought zone to signal exhaustion among buyers, so the climb could still carry on until the next major upside barrier.

The euro got a strong boost from upbeat results of the December PMI readings for the manufacturing and services sectors of Germany and France. The readings all beat expectations, suggesting that the region is enjoying a rebound even with fresh lockdown measures announced.

Note that the ECB also recently decided to extend the deadline of its PEPP which means that the economy could be kept afloat by stimulus for much longer. The BOJ is also widely expected to extend the duration of its aid package, possibly leading to another leg higher for risk-taking, which is bearish for the lower-yielding yen.

Meanwhile the yen is on weak footing as risk appetite has been in play mostly due to vaccine developments and stimulus hopes. These could bring about an earlier return to normal business conditions, likely keeping risk-on flows in play.