EUR/JPY Price Analysis: Bearish divergence hints at further weakness

EUR/JPY is showingacute bearish divergence on the weekly chart compared to 2023. This indicates the potential for a pullback on the horizon. A negative close next week would provide further evidence of a correction forming. The pair’s price has formed a bearish divergence with the Relative Strength Index in the current week when compared with the similar high in November 2023. Euro versus Japanese Yen: Weekly chart Divergence occurs when price reaches a higher high but the RSI fails to follow.

It is a sign of underlying weakness in the asset price and a precursor to a possible correction. In the case of EUR/JPY the new multi-year high reached this week was not accompanied by a higher high in the RSI when compared with the high in November 2023. The divergence is quite acute suggesting a stronger possibility it could indicate a subsequent bearish pullback in price. A natural target for a pullback if it develops would be the red 50-week Simple Moving Average at 157.080.

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