EUR/JPY extends recovery to 121.70 but remains vulnerable

After an initial dip to the lowest level since March 2013, the EUR/JPY cross bounced-off lower levels to currently trade comfortable above 121.00 handle, near session high level, around 121.70.

The pair last week weakened for four consecutive sessions, reversing from a 2-week high level of 124.19 and fell to over 3-year low level of 120.83 as Yen surged on global risk-aversion. 

With both the US Federal Reserve and the Bank of Japan scheduled to announce their monetary policy decisions in the upcoming week and with a relatively lighter Euro-zone economic calendar, traders will focus on USD/JPY major in order to derive this week's move for the EUR/JPY cross.

Technical levels to watch

From current levels, sustained trade above 121.70-75 resistance, the pair could stage a minor recovery towards 122.00 handle and momentum above 122.00 handle is likely to get extended further towards 122.50 and 123.00 round figure mark resistance. This 123.00 resistance, also coinciding with 20-day SMA now seems to cap any further recovery for the pair from near-term oversold conditions.

Meanwhile on the downside, weakness back below 121.00 handle might now trigger resumption of the pair's medium-term downward trajectory, dragging it below 120.00 psychological mark support towards testing its next major support near 119.00 level, lows tested in Feb. & April 2013.