EUR/JPY: downside and the 122.50 level exposed again?

EUR/JPY is currently trading at 124.40 with a high of 124.52 and a low of 124.21.

EUR/JPY's bulls lost control last week with a series of sessions to the downside from the 125.80 high. The yen gathered traction across the board while the euro moved into a sideways channel since 23rd May highs in the 1.1260's.

"The Japanese yen got a boost on Thursday from better-than-expected local inflation figures, and a resurge of risk aversion after the OPEC failed to surprise the markets, prompting a sell-off in oil," noted Valeria Bednarik, chief analyst at FXStreet, adding, "another factor helping the JPY were yields, as despite some attempts of recovering ground, ended the week lower, with the 10-year note benchmark down to 2.25%."

A busy week ahead for the dollar: what will nonfarm payrolls have to offer? - Nomura

Meanwhile, stocks on Wall Street have also started to consolidate the strong performances since the 18th March enabling the yen to harden up; In the absence of positive data from the US, this could be a trend that might continue. It is a busy week ahead for the dollar and nonfarm payrolls at the end of the week might just determine the dollar's fate while markets get set for the Fed next month. 

EUR/JPY levels

EUR/JPY is currently consolidating last week's correction of the 122.50 (13th March high) rally. The price was rejected, however, at 16th May highs for a double top. This jeopardises the April bullish trend from the 114.80's and opens up an argument for 122.50 again as a medium-term target. 

EUR/JPY 4hr chart

"Shorter term, the pair has an increased bearish potential, given that in the 4 hours chart, the price is barely holding above a bullish 100 SMA, whilst technical indicators stand within negative territory, with limited downward strength amid low volume by the end of the week, but far from signaling downward exhaustion," explained Valeria Bednarik, chief analyst at FXStreet.