EURJPY is trading inside a descending triangle visible on the daily time frame, and price is closing in on the bottom of the formation.

Support at the 128.00 major psychological mark could be tested soon, and technical indicators are giving mixed signals on what might happen next. The 100 SMA is below the 200 SMA to suggest that the path of least resistance is to the downside or that support is more likely to break than to hold. If that happens, EURJPY could slide by the same height as the triangle or around 600 pips.

On the other hand, stochastic is turning higher after dipping into the oversold region, suggesting that buyers are returning while sellers take a break. In that case, support would likely hold and take EURJPY back to the triangle resistance near 131.00.

RSI has a bit more room to move lower, so price could keep following suit while sellers have the upper hand.

Risk-off flows stemming from the FOMC decision dragged EURJPY south in recent trading sessions, and this kind of market sentiment might be enough to spur a break lower. The central bank confirmed that they are moving closer to tightening monetary policy soon, as the US economy is almost out of the woods when it comes to the pandemic.

There are no major reports due from both the eurozone and Japan for the rest of the week, so sentiment could be the main driving factor for this pair. The US advance GDP and core PCE price index are still lined up, so strong results would underscore the Fed’s hawkish stance.

On the other hand, downbeat data could undermine tightening hopes, which might be bullish for riskier holdings like the euro and bearish for safe-havens like the yen.