EUR/JPY extended gains for a fourth straight session, trading near 184.80 in Asian hours on Tuesday. On the daily chart, the cross remains inside a rising wedge, a pattern often associated with fading upside momentum and a potential bearish reversal. Despite that, price action is holding above the 50-period and nine-period Exponential Moving Averages (EMAs), keeping the near-term tone constructive, while the 14-day Relative Strength Index (RSI) sits around 52.89, in neutral territory with a mild bullish tilt.
Support is clustered around the 50-day EMA at 184.52, alongside the rising wedge’s lower boundary near 184.60 and the nine-day EMA at 184.03. A firm break beneath this confluence could reassert downside pressure and bring the eight-month low of 179.37, posted on August 3, back into view. Resistance is seen at the wedge’s upper boundary around 186.10; a sustained move above it could allow a retest of the 187.95 record high set on April 17.
Rising Wedge Signals Warning for EUR/JPY Bulls
We should closely monitor the consolidation of the EUR/JPY cross around 184.80, as the daily rising wedge pattern suggests the four-day rally may soon lose steam. This technical setup typically warns of a bearish reversal, which aligns with recent market speculation surrounding further interest rate hikes from the Bank of Japan. To navigate this, we suggest derivative traders consider buying short-term put options to hedge against a potential downside turn.
Key Support, Bear Put Spreads, and Upside Scenarios
The crucial area to watch is the support zone between 184.03 and 184.60, which holds both the 9-day and 50-day Exponential Moving Averages. If the price breaks below this range, it could quickly trigger a slide toward the August 3 low of 179.37, where we previously saw high trading volumes. For those anticipating this breakdown, purchasing bear put spreads can help capitalize on the drop while keeping premium costs low.
Alternatively, a sustained move above the wedge resistance at 186.10 could push the pair back toward the April 17 high of 187.95. However, with Eurozone business confidence remaining subdued and the European Central Bank expected to ease rates further, sustained upward momentum may be difficult to maintain. Because of this, we favor structured options that limit risk rather than outright long positions if a temporary breakout occurs.
