EUR/JPY: Technical Analysis Points to Potential Bearish Setup

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The EUR/JPY cross has seen continued growth for the third consecutive session, currently hovering around 165.10 as of the time of writing. This upward movement comes amid mixed Purchasing Managers Index (PMI) data from Germany and the Eurozone, which has contributed to the Euro gaining ground against the Japanese Yen.

Taking a closer look at the technical aspect, the pair remains within a range-bound area, characterized by price movements bouncing between support and resistance levels within a linear rectangle formation. Particularly noteworthy is the rejection of both supply and demand areas by the price action, alongside indications from the stochastic indicator suggesting potential reversal signals.

Analyzing the signals provided by the stochastic indicator, divergence is observed on lower timeframes (including daily) alongside an overbought condition on the H4 timeframe. These indicators collectively point towards a possible bearish setup in the making.

Based on the identified clues and signals, attention is drawn towards a potential bearish scenario, with the expectation of the price retracing towards the middle of the rectangle, precisely at the Point of Control (POC) value. Subsequently, there's anticipation for a continuation towards the lower side of the pattern.

As traders assess these technical indicators and market dynamics, the potential for a bearish setup in the EUR/JPY cross is on the radar, signaling a strategic opportunity for those positioning themselves accordingly in the forex market.