During the period between July 20 and July 27, the EUR/JPY pair managed to nosedive and recover consistently, forming a bearish divergence while the rate was rising. On July 29, the pair broke below the downtrend trendline. After the breakout, it failed to test the 61.8 Fibonacci resistance level applied to a low hit on July 20 and a high reached on July 31. After that, the pair rushed up to form a double top.
Bearish divergence, trendline breakout, and the double top formation suggest that the trend down was established. At the same time, the pair is trading right at the upper trendline of the descending channel being about to test the 38.2% Fibonacci resistance level.
Consider selling EUR/JPY while it is trading between the current rate (136.11) and R1 (136.18) targeting 161.8% Fibonacci retracement applied to the last wave up before the trendline breakout (24.07 low and 27.07 high). A daily close above this level could be used as a signal to liquidate short positions.
Support: 135.47 and 134.55
Resistance: 136.18
