EUR/JPY: Key falling trendline intact despite risk-on and bullish outside-day

• The EUR/JPY created a bullish outside-day candle yesterday.
• The risk-on in equities favors the JPY bears.
• Still, the pair is struggling to beat the trendline connecting the Sept. 26 high and Oct. 22 high.

The EUR/JPY created a bullish outside-day yesterday, validating the bearish exhaustion signaled by the long-tailed daily candle of last Friday.

So far, however, the follow-through has been anything but encouraging.  Notably, the JPY cross is on the defensive at 128.50, despite the risk-on action in the Asian equities and the overnight rally in the US stocks. Hence, there is merit in being cautious.

The upside could gather traction once the falling trendline hurdle is cleared in a convincing manner. The bullish breakout may happen if the stocks remain bid and the US wage growth numbers, scheduled for release at 12:30 GMT, blows past expectations.

This is because the combination of upbeat US data and risk-on in equities could hurt JPY more than the EUR.

EUR/JPY Technical Levels

Resistance: 128.77 (trendline hurdle), 129.21 (Oct. 11 low), 129.89 (200-day SMA)

Support: 127.61 (previous day's low), 126.63 (Oct. 26 low), 126.00 (psychological hurdle)