• A bull flag formation is signaling a continuation of a rally after a time correction.
• The RSI (14) needs to overstep 60.00 for a fresh upside.
• The 20- and 100-EMAs are scaling higher, which signals for gains ahead.

The EUR/JPY pair is oscillating in a narrow range of 136.48-137.08 since Friday. The cross has been facing headwinds while crossing March’s high at 137.58. The asset has remained in a positive trajectory amid broader weakness in the Japanese yen.

The formation of a bullish flag chart pattern over a four-hour time frame is presenting a bull-case scenario for the market participants. The chart pattern signals a directionless move after a strong run towards the north and leads to a further upside if consolidation breaks out decisively. A consolidation phase in a bull flag formation reflects a shakeout for the retail participants.

The 20- and 100-period Exponential Moving Averages (EMAs) at 136.62 and 135.68 respectively are advancing firmly, which adds to the upside filters.

Meanwhile, the Relative Strength Index (RSI) (14) has trimmed its range to 40.00-60.00, which signals a consolidation ahead. For a fresh impulsive wave, the RSI (14) needs to violate 60.00 decisively.

A cross of March’s high at 137.58 will activate the bull flag breakout, which will send the asset towards the round level resistance of 138.00, followed by the 13 August 2015 high at 138.85.

On the flip side, euro bulls may lose momentum if the asset drop below April’s low at 134.34, which will drag the asset towards the March 25 low at 133.73. A breach of the latter will send the asset to its ultimate target of February 10 high at 133.15.

EUR/JPY four-hour chart