EUR/JPY boosted amid technical buying, probing 21DMA at 129.00 level

• EUR/JPY pushed higher on Wednesday, rallying from the low 128.00s to the 129.00 level, where it now tests its 21DMA.
• A break above the 129.00 area could see technical buying accelerate, pushing the pair on towards resistance around 130.00.

EUR/JPY lept higher on Wednesday and is now probing its 21-day moving average at around the 129.00 level. That means the pair is trading up nearly 0.9% on the day, which would mark its best performance going all the way back to September. Technical buying seemed to be the main factor boosting pair on Wednesday, with it having recently broken to the north of a key downtrend.

The break above the downwards trendline that had been suppressing the price action going all the way back to early November suggests a medium-term shift in EUR/JPY’s momentum. Should the pair manage to break above its 21DMA, that would suggest a move towards the next key area of resistance around 130.00 is on the cards. Conversely, failure to break above the 21DMA/129.00 area would suggest a move back towards recent lows around 127.50 likely, amid a lack of notable support to prevent such a drop.

Short-term momentum indicators suggest that the pair hasn’t quite yet passed into overbought territory. On the four-hour candlesticks, EUR/JPY’s 14-period Relative Strength Index has risen to around 67.0, just below the 70.0 level classically associated with conditions having become overbought. Perhaps the pair can continue to push higher and break above the current resistance, before then seeing some profit-taking.