EUR/JPY Technical Analysis: On the defensive below 126.50, double top on 4H chart

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EUR/JPY is struggling to capitalize on the falling channel breakout, confirmed on April 12 with the 4-hour chart flashing a double top pattern with the neckline support at 126.20

Daily chart

  • As seen above, the pair confirmed a falling channel breakout with a 0.83 percent rise in Friday, the biggest single-day rise since Jan. 25. 
  • So far, however, the follow through to that bullish breakout has been anything but bullish. The cross has persistently struggled to clear resistance near 126.80 in the last three days. 

4-hour chart

  • On the 4-hour chart, the relative strength index (RSI) is teasing a drop below 50.00, having created lower highs (bearish divergence) over the last couple of days. 
  • As a result, the pair may complete the double top pattern with a drop to the neckline support, currently at 126.20. 
  • A 4-hour close below the neckline would confirm a double top breakdown and create room for 125.60 (target as per the measured move method). 

The bearish setup would be invalidated if and when the spot finds acceptance above 126.80. That would put the focus back on the falling channel breakout seen on the daily chart. 

Trend: Bearish below 126.20

 

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