EUR/JPY is still on a steady downtrend as the pair gears up for another test of the descending trend line resistance on its 4-hour time frame. Price has recently bounced from its recent selloff and may retest the 137.00 major psychological resistance.

Stochastic is still moving towards the overbought zone, indicating that there’s enough buying momentum to lead to a trend line test. If that holds as resistance, EUR/JPY could head back down to the previous lows near 135.00 or perhaps make new lows near the 134.00 levels.

Take note though that the selloff seems to be slowing down as the pair is having a tough time making new lows. Should the 135.00 area continue to hold as support, euro bulls could find enough buying momentum to trigger an upside break from the trend line and start a reversal.

By Kate Curtis from Trader’s Way.