EUR/JPY Price Analysis: Rallies to the head-and-shoulders neckline, but the pattern stills in play

• The EUR/JPY rallies 150-pips but struggles at the head-and-shoulders neckline, at around 135.20-35.
• Risk-aversion usually benefits safe-haven peers, but the last meeting ECB’s minutes boosted the shared currency.
• EUR/JPY Price Forecast: The head-and-shoulders pattern remains in play and targets 130.00

The EUR/JPY rallied towards the head-and-shoulders neckline but lacked the strength to break above it and recorded a daily close just shy of the above-mentioned at around 135.23, which also confluences with the 50-day moving average (DMA). At the time of writing, the EUR/JPY is trading at 135.16, on the wrong foot as the Asian Pacific session starts.

Risk-aversion remains after the Wall Street close. Still, some Asian futures look towards a higher open, but most indices are trading in the red. High inflationary pressures begin to feel on significant retail stores in the US, such as Walmart and Target, which dragged US stocks on Wednesday after reporting short profit margins caused by elevated prices.

• Also read: EUR/USD surges towards 1.0580 as bulls ignore a risk-off mood, post-ECB minutes

On Thursday, the EUR/JPY began the day near the session’s lows at around 134.00 and rallied towards the daily high at 135.45, just shy of the 50-hour simple moving average (SMA), retreating afterward, and seesawed around the 134.00-135.50 range.

EUR/JPY Price Forecast: Technical outlook

On Wednesday note, I wrote that it “was revenge day for EUR/JPY bears, which caused a drop of more than 220-pips during the day and kept the head-and-shoulders chart pattern in play, which was threatened by Tuesday’s price action.”

Thursday’s price action was revenge for EUR/JPY bulls but failed shortly because the daily highs were below the head-and-shoulders neckline. With that said, the cross-currency bias remains intact and is neutral downwards in the near term. Also, the head-and-shoulders chart pattern is still in play.

That said, the EUR/JPY first support would be 134.00. Break below would expose the May 16 daily low at 133.74, followed by May 13 swing low at 133.09 and then the 100-day moving average (DMA) at 132.25, before exposing the 200-DMA at 131.10.

Key Technical Levels