FOREX WEEKLY REVIEW AND OUTLOOK 17TH/JAN2010
Euro was broadly pressured last week on growing concern of Greece's large deficits and doubts over its sovereign creditworthiness, in particular after ECB Trichet made it clear that there will not be any special treatment to a signal member of the Eurozone. Yen rose against most major currencies on risk aversion on as China stepped up its measures to cool lending. Sterling, on the other hand, was supported by speculations that BoE will let the asset purchase program expire in February. Dollar was initially pressured by risk appetite, but later rebounded strongly, with the help of weakness in Euro and crude oil.
As expected, the ECB meeting offered no surprise to the market on both economic outlook and monetary policy. The central bank kept the main refinancing rate at 1% and stated current interest rates are ‘appropriate. Moreover, the Eurozone’s economy will expand at a ‘moderate’ pace while inflation outlook remains subdued. Regarding the fiscal health of Greece, Trichet said it has "a lot of hard work to do," and warned that "no government, no state can expect from us any special treatment." Nevertheless, when talking about Greece's exit of Eurozone, Trichet said he wouldn't comment on an "absurd hypothesis". Instead, Trichet said that ECB would carefully examine Greece's steps to slash the deficit over three years to below 3%.
Greece presented a three-year budget plan to EC that includes more than EUR 10 billion euro in deficit-reduction measures for this year budget shortfall. But markets are skeptical about the workability of the ambitious plan. German Chancellor Angela Merkel also said at a private forum that Greece’s fiscal crisis poses a "very difficult phase" for the euro.
The Japanese yen was broadly higher last week on risk aversion, in particular against European majors. Also, the yen was supported by China's act to step up the measures to cool lending. China raised bill yields second time in a week to tightening liquidity further. PBoC sold benchmark 1-year bill at 1.8434% today. Last week, PBoC raised yield on three-month bills to 1.3684%. In addition, PBoC said it was raising reserve requirements ratio by 0.5 percent points which now clearly indicates that China is begging to tighten monetary policy.
Sterling, on the other hand, was supported by comments from BoE Sentance and was relatively firm during the week. BoE MPC committee member Andrew Sentance said in an interview with Guardian that "at some point you have to say we have increased the amount of stimulus enough. It doesn't mean you are going to withdraw it but you don't have to keep adding to it." Also, he said that impact of oil and commodities prices, and sterling, on inflation need to be considered and the bank is approaching a point that need to "hold back and wait and see" how stimulus is "flowing into the recovery". He also express his confidence that there is little risk of a "double-dip recession" in UK. The comments triggered speculation that BoE will let the asset purchase program expire in February.
Looking at the charts, despite a brief break, dollar index seemed to have drawn some support from 38.2% retracement of 74.19 to 78.45 at 76.82 and recovered. Friday's break of 77.30 minor resistance suggests that correction from 78.45 might have completed at 76.60 already. Initial bias is mildly on the upside for 78.19 resistance and break there will indicate that whole rise from 74.19 has resumed for 38.2% retracement of 89.62 to 74.19 at 80.08. However, a break of 76.60 support will suggest that correction from 78.45 is still in progress for 61.8% retracement at 61.8% retracement of 74.19 to 78.45 at 75.81 instead.
The Week Ahead:
Euro is expected to remain broadly pressured this week. EUR/USD's corrective rise from 1.4217 might be completed at 1.4578 already and further fall should be seen to retest this support. EUR/JPY's rise from 127.50 should have be completed at 134.36 on a small head and shoulder top pattern and deeper fall should be seen to 126.88/127.50 support zone. EUR/GBP has also broken out of recent range to resume the decline from 0.9410.
Dollar was rather mixed last week and again, whether it could stage a sizeable rebound will depend on the development in commodities. Crude oil has already made a short term to at 83.95 last week and is set to have some more pull back this week. The focus will be on whether gold's recovery from 1075 has completed at 1163 last week. A break of near term support of 1120 will likely trigger some selling in gold to retest 1075 and thus give dollar a boost to has a broad based rally.
Another important focus will be on Sterling which was supported by BoE Sentance's comments. Some important data will be released this week, including CPI, employment and retail sales, together with BoE minutes. Main focus will be on whether these events would push the sterling further higher, or will they trigger a near term reversal in the pound.
■Tuesday: UK CPI; German ZEW; BoC rate decision; US TIC capital flow; NZ CPI
■Wednesday: UK job report, BoE minutes; Canada CPI, US new residential construction, PPI; NZ retail sales
■Thursday: Eurozone PMIs; Swiss ZEW; US Philly Fed index, Leading indicators
■Friday: UK retail sales; Canada retail sales
EUR/USD Weekly Outlook:
EUR/USD recovered further to 1.4578 last week but was limited by mentioned 38.2% retracement of 1.5143 to 1.4217 at 1.4571 and fell sharply since then. The development argues that consolidations from 1.4217 might have completed already. Initial bias is on the downside for 1.4266 support. Break there will suggest that whole decline from 1.5143 is resuming for 38.2% retracement of 1.2329 to 1.5143 at 1.4068 next. On the upside, above 1.445 minor resistance will turn intraday bias neutral and bring consolidations. But upside should be limited below 1.4578 resistance and bring fall resumption.
In the bigger picture, medium term rise from 1.2456 has completed at 1.5143 on bearish divergence conditions in daily MACD. Focus now turns to 1.3737 cluster support (50% retracement of 1.2329 to 1.5143 at 1.3736). Decisive break there will also confirm the case that three wave consolidation from 1.2329 has finished at 1.5134 too. In other words, whole medium term term fall from 1.6039 should be resuming for a new low below 1.2329. On the upside, above 1.5143 resistance is needed to invalidate this view. Otherwise, outlook will now remain bearish.
In the long term picture, the lack of impulsive structure of the rise from 1.2329 argues that it's the second wave of the wide range correction that started from 1.6039. Another medium term decline could still be seen to 1.2329 and below. Break of 1.1639 support is possible based on 100% projection of 1.6039 to 1.2329 from 1.5143. But downside will likely be contained by 61.8% retracement of 0.8223 to 1.6039). After all, the long term up trend from 0.8223 is set to resume after completing the three wave medium term correction from 1.6039.
USD/JPY Weekly Outlook:
USD/JPY's fall from 93.74 extended further last week and the development suggests that whole rebound from 84.81 has completed with three waves up to 93.74 already. Initial bias will remain on the downside this week for 87.36 support first and break there will confirm this case and target a new low below 84.81. On the upside, above 92.03 minor resistance will suggests that an intraday low is formed and some consolidation could be seen. But risk will remain on the downside as long as 93.74 resistance holds and another fall is still expected after the consolidations.
In the bigger picture, USD/JPY is still trading below medium term trend line resistance at 94.71 and 55 weeks EMA at 94.07. Whole down trend from 124.13 is likely still in progress and a break of 84.81 will target 1995 low of 79.75. However, note bullish convergence condition is seen in weekly MACD. Sustained trading above the medium trend line resistance will be the first signal of medium term reversal and in such case, focus will turn to 101.43 resistance for confirmation.
In the long term picture, fall from 124.13 is still in progress after breaking out of the long term triangle pattern and a test on 79.75 low made in 1995 should be seen. The structure of the current fall from 101.43 will be important to determine whether 79.75 will be taken out decisively. Acceleration of the current fall from 101.43 will build up downside momentum which should then pull monthly MACD away from the signal line and will indicate that fall from 124.13 is resuming the multi-decade down trend. However, loss of downside momentum in the coming fall will indicate that it's possibly just part of a long term sideway pattern from 79.95 and strong support should be seen after breaching 79.75 to conclude the medium term fall.
GBP/USD Weekly Outlook:
GBP/USD climbed further to 1.6353 last week as correction from 1.5829 continued but lose momentum since then. With 4 hours MACD crossed below signal line, initial bias is neutral this week. While another rise cannot be ruled out, upside is still expected to be limited below 61.8% retracement of 1.6875 to 1.5829 at 1.6475 to conclude the correction. On the downside, below 1.6193 minor support will suggest that such correction has completed and will flip intraday bias back to the downside for 1.5829/5896 support zone. Break there will confirm that whole fall from 1.6875 has resumed for 1.5706 key cluster support.
In the bigger picture, we're still favoring the bearish case that medium term rebound from 1.3503, which is treated as a correction to down trend from 2.1161, has completed at 1.7043. Firm break of 1.5706 cluster support (38.2% retracement of 1.3503 to 1.7043 at 1.5691) will confirm this case and indicate that whole down trend from 2.1161 is likely resuming for a new low below 1.3503.
However, note that sustain break of 61.8% retracement of 1.6875 to 1.5829 at 1.6475. will in turn indicate that whole fall from 1.6875 has completed and recent price actions from 1.7043 are merely consolidations to the larger rise from 1.3503 only. That is, whole medium term rise from 1.3503 might not be finished yet and another rise could still be seen to 1.7332/8236 (50% and 61.8% retracement of 2.1161 to 1.3503) before completion.
In the longer term picture, the corrective nature of the multi-decade advance from 1.0463 (85 low) to 2.1161 as well as the impulsive nature of the fall from there suggests that GBP/USD is now in an early stage of a long term down trend. Rebound from 1.3503, which is treated as correction in the larger down trend, should be limited by resistance zone of 1.7332/8236 and bring down trend resumption towards 1.4063 low. We'll hold on to the bearish view as long as 1.8236 fibonacci level holds.
USD/CHF Weekly Outlook:
USD/CHF edged lower to 1.0131 last week but drew strong support from mentioned 61.8% retracement of 0.9916 to 1.0506 at 1.0141 and rebounded. The development suggests that correction from 1.0506 has completed at 1.0131 already and initial bias will be on the upside this week for 1.0383 resistance first. Break there will confirm this case and suggest that whole rally from 0.9916 is resuming for 1.0590 medium term support turned resistance next. On the downside, however, break of 1.0131 support will dampen this view and will bring deeper decline towards 0.9919 low instead.
In the bigger picture, medium term fall from 1.1963 has completed with five waves down to 0.9916 already, on bullish convergence condition in daily MACD. Also, the three wave consolidation from 1.2296 should be finished too. Current rise from 0.9916 is expected to extend further to medium term trend line resistance first (now at 1.1005). Sustained trading above the trend line will affirm the case that long term rise from 2008 low of 0.9634 is resuming for another high above 1.2296. On the downside however, a break of 0.9916 support will invalidate this bullish view and argue that medium term down trend in USD/CHF is still in progress for 0.9634 low.
In the longer term picture, a long term bottom is no doubt in place at 0.9634 with bullish convergence condition in daily MACD. USD/CHF failed to take out 55 months EMA and reversed again and thus gives no confirmation of long term reversal yet. We're neutral in the long term outlook for the moment and would wait for further evidence from the markets before making a stance.
AUD/USD Weekly Outlook:
AUD/USD edged higher to 0.9327 last week but lost momentum and turned into consolidations since then. With a short term top in place, more consolidation should be seen initially this week and deeper correction could be seen to 38.2% retracement of 0.8734 to 0.9327 at 0.9100 or below before staging another rise. On the upside, though, break of 0.9327 will bring rally resumption to 0.9404 high first.
In the bigger picture, the corrective three wave structure of fall from 0.9404 to 0.8734 suggests that whole medium term rise from 0.6008 is still in progress. Break of 0.9404 will confirm medium term rise resumption and should target 2008 high of 0.9849. On the downside, though, break of 0.8734 support will revive the case that whole medium term rise from 0.6008 has completed and will turn outlook bearish for deeper correction towards 0.7702/0.8626 support zone.
In the longer term picture, as noted before, long term correction from 0.9849 has likely completed at 0.6008 already, after being supported slightly above 76.4% retracement of 0.4773 (01 low) to 0.9849 (08 high). Rise from 0.6008 is possibly developing into a new up trend which extend the long term rise from 0.4773. We'll continue to favor the long term bullish case as long as 0.7702 support holds and expect an eventual break of 0.9849 high. However, a break of 0.7702 support will firstly argue that whole rise from 0.6008 has completed. Secondly this will open up the case that AUD/USD is in phase of a long term consolidation and will gyrate in the large range of 0.6008/0.9849 for some time.
USD/CAD Weekly Outlook :
USD/CAD edged lower to 1.0223 last week but continued to lose downside momentum as it approaches 1.0205 key support, as seen in bullish convergence condition in 4 hours MACD. Nevertheless, another fall could still be seen as long as 1.0412 resistance holds. As noted before, price actions from 1.0851 are treated as consolidation to rise from 1.0205 only. Hence, even in case of another fall, we'd expect further loss of momentum and downside should be contained above 1.0205 key support and bring reversal. On the upside, above 1.0412 resistance will be the first signal that correction from 1.0851 has completed and will flip intraday bias back to the upside for 1.0744 resistance for confirmation.
In the bigger picture, we're still favoring the case that a medium term bottom is already in place at 1.0205 with bullish convergence conditions in daily MACD. As noted before, fall from 1.3063 is viewed as a correction to long term rise from 0.9056. Such correction might have already completed with three waves down to 1.0205 already (1.0784, 1.1732, 1.0205). Break of 1.0851 resistance will confirm this case and target 61.8% retracement of 1.3063 to 1.0205 at 1.1971 at least. On the downside, however, break of 1.0205 will invalidate this view and bring down trend resumption to parity instead.
In the longer term picture, the three wave structure of the fall from 1.3063 to 1.0205 revived the case that it's a correction to rise from 0.9056. Sustained trading above 61.8% retracement of 1.3063 to 1.0205 at 1.1971 will indicate that whole rise from 0.9056 might be resuming for another high above 1.3063.
EUR/CHF Weekly Outlook :
EUR/CHF fell further to 1.4722 last week and turned sideway since then. Initial bias remains neutral this week and some more consolidation might be seen. Nevertheless, another fall is still expected as long as 1.4827 resistance holds. Below 1.4722 will target 1.4577 key support next. On the upside, break of 1.4827 resistance will indicate that a short term bottom is formed with bullish convergence condition in 4 hours MACD. In such case, stronger rebound should be seen to 1.4894/4988 resistance zone. However, note that break of 1.4988 resistance is needed to indicate that EUR/CHF has bottomed. Otherwise, outlook will remain bearish and another fall should be seen after consolidations.
In the bigger picture, with EUR/CHF still staying well below 55 weeks EMA, fall from 1.5880 is likely still in progress. Current decline should have a test on 1.4577 support first and break will target 2008 low of 1.4315. On the upside, break of 1.5007 support turned resistance is needed be the first signal to indicate that fall from 1.5446 has finished and revive the case that 1.4577 is still in progress. Otherwise, medium term outlook will remain bearish.
In the long term picture, the corrective three wave structure of the rise from 1.4391 to 1.6827 is arguing that fall from 1.6827 is resumption of long term down trend from 1.8234. EUR/CHF's failure to take out 55 weeks EMA suggests that whole fall from 1.6827 is still in progress. A break of 1.4577 support will affirm this case and bring another low below 1.4315 to resume the long term down trend.
EUR/GBP Weekly Outlook :
EUR/GBP finally had a downside breakout from recent range last week and dropped to as low as 0.8809 last week. Initial bias remains on the downside this week and whole fall from 0.9410 should extend to 61.8% projection of 0.9410 to 0.8833 from 0.9153 at 0.8786 next and below. But we'd expect loss of momentum as EUR/GBP approaches 0.8704 support and bring reversal. On the upside, above 0.8883 minor resistance will turn intraday bias neutral and bring consolidations. But upside should be limited below 0.9027 resistance and bring another fall.
In the bigger picture, at this point, we're still favoring the case that medium term correction from 0.9799 has completed with three waves down to 0.8399 already. Rise from 0.8399 is possibly resuming the long term up trend. Hence, fall from 0.9410 is viewed as a correction only and should be contained by 0.8704 support. Break of 0.9027 resistance will suggest that correction from 0.9410 has completed and rise from 0.8399 is resuming for a test on 0.9799 high first and then 61.8% projection of 0.6535 to 0.9799 from 0.8399 at 1.0416.
However, break of 0.8704 support will argue that firstly, rise from 0.8399 has completed at 0.9410 already. Secondly, this will indicate that fall from 0.9410 is likely the third leg of the correction pattern that started at 0.9799 and could extend beyond 0.8399 support before the whole correction concludes.
In the long term picture, long term up trend in EUR/GBP might be resuming as correction from 0.9799 has completed at 0.8399. Decisive break of 0.9799 high will confirm this bullish view and target 261.8% projection of 0.5680 to 0.7258 from 0.6535 at 1.0666. Break of 0.8704 will delay the bullish view but we'd still expect the long term up trend to resume sooner or later as long as 0.8186 support holds.
EUR/JPY Weekly Outlook :
After edging higher to 134.36, EUR/JPY reversed and fell sharply to as low as 130.29. The development indicates that rise from 127.50 has completed at 134.36, ahead of 134.54 resistance on a small head and shoulder top pattern. Also, it suggests that recent price actions from 126.88 are merely consolidation to fall from 138.47 and should have completed too. Initial bias will remain on the downside this week and further decline should be seen to 126.88/127.50 support zone. On the upside, above 131.67 minor resistance will turn intraday bias neutral and bring consolidations. But recovery is expected to be limited well below 133.62 resistance and bring fall resumption.
In the bigger picture, EUR/JPY is still bounded in medium term range between 126.88 and 139.21 and outlook remains neutral for the moment. On the downside, a break of 126.88 support will revive that case that medium term rebound from 112.10 has completed at 139.21 already and down trend from 169.96 is resuming. In such case, we'd expect deeper fall to 112.10 and beyond to resume the long term down trend. On the upside, however, break of 134.54 resistance will revive that case that recent price actions are merely consolidations to medium term rise from 112.10 already and another high above 139.21 should be seen before EUR/JPY tops.
In the long term picture, up trend from 88.96 (00 low) has completed at 169.96 and made a long term top there. Subsequent price actions are either developing into resumption of the multi decade down trend from 285.56, or wide range corrective pattern. In either case, upside should be limited well below 169.96 high and we're expecting at least one more medium term fall after the current rise from 112.10 completes. The final structure of the rebound from 112.10 will provide more indication on whether a test on 88.96 low would be seen.
GBP/JPY Weekly Outlook :
GBP/JPY was bounded in choppy sideway trading in familiar range below 150.68 last week without making any progress. Initial bias remains neutral this week and some more sideway trading could be seen. Note that another rise cannot be ruled out with 146.64 minor support holds. Above 149.98 will bring rally to 150.68 or above. However, there is no change in the view that recent price actions from 139.96 are merely consolidations to fall from 163.05 only, with rise from 139.26 as the third leg. Hence, even in case of another rise, upside should be limited by 153.21 resistance and bring reversal. On the downside, below 146.64 minor support will suggest that rise from 139.26 has completed at 150.68 already and fall from there is resuming. Intraday bias will then be flipped back to the downside for 141.99 support for confirmation. And break there will target a retest on 139.26 low.
In the bigger picture, medium term rebound from 118.18, which is a correction to the long term down trend from 07 high of 251.90, has completed at 163.05 already. Fall from 163.05 is expected to resume after sideway consolidation from 139.69 completes and should target a new low below 118.81. However, note that sustained break of 61.8% retracement of 163.05 to 139.26 at 153.96 will argue that fall from 163.05 has finished already and will in turn indicate that rise from 118.81 is still in progress to another high above 163.05 before conclusion.
In the longer term picture, fall from 251.09 is treated as resumption of multi decade down trend. Note that the fall from 215.87 is not treated as the fifth wave, but the third wave inside the third wave that started at 241.35. On resumption, the down trend will extend to 61.8% projection of 215.87 to 118.81 from 163.05 at 103.03 next, which is close to 100 psychological support.
Euro was broadly pressured last week on growing concern of Greece's large deficits and doubts over its sovereign creditworthiness, in particular after ECB Trichet made it clear that there will not be any special treatment to a signal member of the Eurozone. Yen rose against most major currencies on risk aversion on as China stepped up its measures to cool lending. Sterling, on the other hand, was supported by speculations that BoE will let the asset purchase program expire in February. Dollar was initially pressured by risk appetite, but later rebounded strongly, with the help of weakness in Euro and crude oil.
As expected, the ECB meeting offered no surprise to the market on both economic outlook and monetary policy. The central bank kept the main refinancing rate at 1% and stated current interest rates are ‘appropriate. Moreover, the Eurozone’s economy will expand at a ‘moderate’ pace while inflation outlook remains subdued. Regarding the fiscal health of Greece, Trichet said it has "a lot of hard work to do," and warned that "no government, no state can expect from us any special treatment." Nevertheless, when talking about Greece's exit of Eurozone, Trichet said he wouldn't comment on an "absurd hypothesis". Instead, Trichet said that ECB would carefully examine Greece's steps to slash the deficit over three years to below 3%.
Greece presented a three-year budget plan to EC that includes more than EUR 10 billion euro in deficit-reduction measures for this year budget shortfall. But markets are skeptical about the workability of the ambitious plan. German Chancellor Angela Merkel also said at a private forum that Greece’s fiscal crisis poses a "very difficult phase" for the euro.
The Japanese yen was broadly higher last week on risk aversion, in particular against European majors. Also, the yen was supported by China's act to step up the measures to cool lending. China raised bill yields second time in a week to tightening liquidity further. PBoC sold benchmark 1-year bill at 1.8434% today. Last week, PBoC raised yield on three-month bills to 1.3684%. In addition, PBoC said it was raising reserve requirements ratio by 0.5 percent points which now clearly indicates that China is begging to tighten monetary policy.
Sterling, on the other hand, was supported by comments from BoE Sentance and was relatively firm during the week. BoE MPC committee member Andrew Sentance said in an interview with Guardian that "at some point you have to say we have increased the amount of stimulus enough. It doesn't mean you are going to withdraw it but you don't have to keep adding to it." Also, he said that impact of oil and commodities prices, and sterling, on inflation need to be considered and the bank is approaching a point that need to "hold back and wait and see" how stimulus is "flowing into the recovery". He also express his confidence that there is little risk of a "double-dip recession" in UK. The comments triggered speculation that BoE will let the asset purchase program expire in February.
Looking at the charts, despite a brief break, dollar index seemed to have drawn some support from 38.2% retracement of 74.19 to 78.45 at 76.82 and recovered. Friday's break of 77.30 minor resistance suggests that correction from 78.45 might have completed at 76.60 already. Initial bias is mildly on the upside for 78.19 resistance and break there will indicate that whole rise from 74.19 has resumed for 38.2% retracement of 89.62 to 74.19 at 80.08. However, a break of 76.60 support will suggest that correction from 78.45 is still in progress for 61.8% retracement at 61.8% retracement of 74.19 to 78.45 at 75.81 instead.
The Week Ahead:
Euro is expected to remain broadly pressured this week. EUR/USD's corrective rise from 1.4217 might be completed at 1.4578 already and further fall should be seen to retest this support. EUR/JPY's rise from 127.50 should have be completed at 134.36 on a small head and shoulder top pattern and deeper fall should be seen to 126.88/127.50 support zone. EUR/GBP has also broken out of recent range to resume the decline from 0.9410.
Dollar was rather mixed last week and again, whether it could stage a sizeable rebound will depend on the development in commodities. Crude oil has already made a short term to at 83.95 last week and is set to have some more pull back this week. The focus will be on whether gold's recovery from 1075 has completed at 1163 last week. A break of near term support of 1120 will likely trigger some selling in gold to retest 1075 and thus give dollar a boost to has a broad based rally.
Another important focus will be on Sterling which was supported by BoE Sentance's comments. Some important data will be released this week, including CPI, employment and retail sales, together with BoE minutes. Main focus will be on whether these events would push the sterling further higher, or will they trigger a near term reversal in the pound.
■Tuesday: UK CPI; German ZEW; BoC rate decision; US TIC capital flow; NZ CPI
■Wednesday: UK job report, BoE minutes; Canada CPI, US new residential construction, PPI; NZ retail sales
■Thursday: Eurozone PMIs; Swiss ZEW; US Philly Fed index, Leading indicators
■Friday: UK retail sales; Canada retail sales
EUR/USD Weekly Outlook:
EUR/USD recovered further to 1.4578 last week but was limited by mentioned 38.2% retracement of 1.5143 to 1.4217 at 1.4571 and fell sharply since then. The development argues that consolidations from 1.4217 might have completed already. Initial bias is on the downside for 1.4266 support. Break there will suggest that whole decline from 1.5143 is resuming for 38.2% retracement of 1.2329 to 1.5143 at 1.4068 next. On the upside, above 1.445 minor resistance will turn intraday bias neutral and bring consolidations. But upside should be limited below 1.4578 resistance and bring fall resumption.
In the bigger picture, medium term rise from 1.2456 has completed at 1.5143 on bearish divergence conditions in daily MACD. Focus now turns to 1.3737 cluster support (50% retracement of 1.2329 to 1.5143 at 1.3736). Decisive break there will also confirm the case that three wave consolidation from 1.2329 has finished at 1.5134 too. In other words, whole medium term term fall from 1.6039 should be resuming for a new low below 1.2329. On the upside, above 1.5143 resistance is needed to invalidate this view. Otherwise, outlook will now remain bearish.
In the long term picture, the lack of impulsive structure of the rise from 1.2329 argues that it's the second wave of the wide range correction that started from 1.6039. Another medium term decline could still be seen to 1.2329 and below. Break of 1.1639 support is possible based on 100% projection of 1.6039 to 1.2329 from 1.5143. But downside will likely be contained by 61.8% retracement of 0.8223 to 1.6039). After all, the long term up trend from 0.8223 is set to resume after completing the three wave medium term correction from 1.6039.
USD/JPY Weekly Outlook:
USD/JPY's fall from 93.74 extended further last week and the development suggests that whole rebound from 84.81 has completed with three waves up to 93.74 already. Initial bias will remain on the downside this week for 87.36 support first and break there will confirm this case and target a new low below 84.81. On the upside, above 92.03 minor resistance will suggests that an intraday low is formed and some consolidation could be seen. But risk will remain on the downside as long as 93.74 resistance holds and another fall is still expected after the consolidations.
In the bigger picture, USD/JPY is still trading below medium term trend line resistance at 94.71 and 55 weeks EMA at 94.07. Whole down trend from 124.13 is likely still in progress and a break of 84.81 will target 1995 low of 79.75. However, note bullish convergence condition is seen in weekly MACD. Sustained trading above the medium trend line resistance will be the first signal of medium term reversal and in such case, focus will turn to 101.43 resistance for confirmation.
In the long term picture, fall from 124.13 is still in progress after breaking out of the long term triangle pattern and a test on 79.75 low made in 1995 should be seen. The structure of the current fall from 101.43 will be important to determine whether 79.75 will be taken out decisively. Acceleration of the current fall from 101.43 will build up downside momentum which should then pull monthly MACD away from the signal line and will indicate that fall from 124.13 is resuming the multi-decade down trend. However, loss of downside momentum in the coming fall will indicate that it's possibly just part of a long term sideway pattern from 79.95 and strong support should be seen after breaching 79.75 to conclude the medium term fall.
GBP/USD Weekly Outlook:
GBP/USD climbed further to 1.6353 last week as correction from 1.5829 continued but lose momentum since then. With 4 hours MACD crossed below signal line, initial bias is neutral this week. While another rise cannot be ruled out, upside is still expected to be limited below 61.8% retracement of 1.6875 to 1.5829 at 1.6475 to conclude the correction. On the downside, below 1.6193 minor support will suggest that such correction has completed and will flip intraday bias back to the downside for 1.5829/5896 support zone. Break there will confirm that whole fall from 1.6875 has resumed for 1.5706 key cluster support.
In the bigger picture, we're still favoring the bearish case that medium term rebound from 1.3503, which is treated as a correction to down trend from 2.1161, has completed at 1.7043. Firm break of 1.5706 cluster support (38.2% retracement of 1.3503 to 1.7043 at 1.5691) will confirm this case and indicate that whole down trend from 2.1161 is likely resuming for a new low below 1.3503.
However, note that sustain break of 61.8% retracement of 1.6875 to 1.5829 at 1.6475. will in turn indicate that whole fall from 1.6875 has completed and recent price actions from 1.7043 are merely consolidations to the larger rise from 1.3503 only. That is, whole medium term rise from 1.3503 might not be finished yet and another rise could still be seen to 1.7332/8236 (50% and 61.8% retracement of 2.1161 to 1.3503) before completion.
In the longer term picture, the corrective nature of the multi-decade advance from 1.0463 (85 low) to 2.1161 as well as the impulsive nature of the fall from there suggests that GBP/USD is now in an early stage of a long term down trend. Rebound from 1.3503, which is treated as correction in the larger down trend, should be limited by resistance zone of 1.7332/8236 and bring down trend resumption towards 1.4063 low. We'll hold on to the bearish view as long as 1.8236 fibonacci level holds.
USD/CHF Weekly Outlook:
USD/CHF edged lower to 1.0131 last week but drew strong support from mentioned 61.8% retracement of 0.9916 to 1.0506 at 1.0141 and rebounded. The development suggests that correction from 1.0506 has completed at 1.0131 already and initial bias will be on the upside this week for 1.0383 resistance first. Break there will confirm this case and suggest that whole rally from 0.9916 is resuming for 1.0590 medium term support turned resistance next. On the downside, however, break of 1.0131 support will dampen this view and will bring deeper decline towards 0.9919 low instead.
In the bigger picture, medium term fall from 1.1963 has completed with five waves down to 0.9916 already, on bullish convergence condition in daily MACD. Also, the three wave consolidation from 1.2296 should be finished too. Current rise from 0.9916 is expected to extend further to medium term trend line resistance first (now at 1.1005). Sustained trading above the trend line will affirm the case that long term rise from 2008 low of 0.9634 is resuming for another high above 1.2296. On the downside however, a break of 0.9916 support will invalidate this bullish view and argue that medium term down trend in USD/CHF is still in progress for 0.9634 low.
In the longer term picture, a long term bottom is no doubt in place at 0.9634 with bullish convergence condition in daily MACD. USD/CHF failed to take out 55 months EMA and reversed again and thus gives no confirmation of long term reversal yet. We're neutral in the long term outlook for the moment and would wait for further evidence from the markets before making a stance.
AUD/USD Weekly Outlook:
AUD/USD edged higher to 0.9327 last week but lost momentum and turned into consolidations since then. With a short term top in place, more consolidation should be seen initially this week and deeper correction could be seen to 38.2% retracement of 0.8734 to 0.9327 at 0.9100 or below before staging another rise. On the upside, though, break of 0.9327 will bring rally resumption to 0.9404 high first.
In the bigger picture, the corrective three wave structure of fall from 0.9404 to 0.8734 suggests that whole medium term rise from 0.6008 is still in progress. Break of 0.9404 will confirm medium term rise resumption and should target 2008 high of 0.9849. On the downside, though, break of 0.8734 support will revive the case that whole medium term rise from 0.6008 has completed and will turn outlook bearish for deeper correction towards 0.7702/0.8626 support zone.
In the longer term picture, as noted before, long term correction from 0.9849 has likely completed at 0.6008 already, after being supported slightly above 76.4% retracement of 0.4773 (01 low) to 0.9849 (08 high). Rise from 0.6008 is possibly developing into a new up trend which extend the long term rise from 0.4773. We'll continue to favor the long term bullish case as long as 0.7702 support holds and expect an eventual break of 0.9849 high. However, a break of 0.7702 support will firstly argue that whole rise from 0.6008 has completed. Secondly this will open up the case that AUD/USD is in phase of a long term consolidation and will gyrate in the large range of 0.6008/0.9849 for some time.
USD/CAD Weekly Outlook :
USD/CAD edged lower to 1.0223 last week but continued to lose downside momentum as it approaches 1.0205 key support, as seen in bullish convergence condition in 4 hours MACD. Nevertheless, another fall could still be seen as long as 1.0412 resistance holds. As noted before, price actions from 1.0851 are treated as consolidation to rise from 1.0205 only. Hence, even in case of another fall, we'd expect further loss of momentum and downside should be contained above 1.0205 key support and bring reversal. On the upside, above 1.0412 resistance will be the first signal that correction from 1.0851 has completed and will flip intraday bias back to the upside for 1.0744 resistance for confirmation.
In the bigger picture, we're still favoring the case that a medium term bottom is already in place at 1.0205 with bullish convergence conditions in daily MACD. As noted before, fall from 1.3063 is viewed as a correction to long term rise from 0.9056. Such correction might have already completed with three waves down to 1.0205 already (1.0784, 1.1732, 1.0205). Break of 1.0851 resistance will confirm this case and target 61.8% retracement of 1.3063 to 1.0205 at 1.1971 at least. On the downside, however, break of 1.0205 will invalidate this view and bring down trend resumption to parity instead.
In the longer term picture, the three wave structure of the fall from 1.3063 to 1.0205 revived the case that it's a correction to rise from 0.9056. Sustained trading above 61.8% retracement of 1.3063 to 1.0205 at 1.1971 will indicate that whole rise from 0.9056 might be resuming for another high above 1.3063.
EUR/CHF Weekly Outlook :
EUR/CHF fell further to 1.4722 last week and turned sideway since then. Initial bias remains neutral this week and some more consolidation might be seen. Nevertheless, another fall is still expected as long as 1.4827 resistance holds. Below 1.4722 will target 1.4577 key support next. On the upside, break of 1.4827 resistance will indicate that a short term bottom is formed with bullish convergence condition in 4 hours MACD. In such case, stronger rebound should be seen to 1.4894/4988 resistance zone. However, note that break of 1.4988 resistance is needed to indicate that EUR/CHF has bottomed. Otherwise, outlook will remain bearish and another fall should be seen after consolidations.
In the bigger picture, with EUR/CHF still staying well below 55 weeks EMA, fall from 1.5880 is likely still in progress. Current decline should have a test on 1.4577 support first and break will target 2008 low of 1.4315. On the upside, break of 1.5007 support turned resistance is needed be the first signal to indicate that fall from 1.5446 has finished and revive the case that 1.4577 is still in progress. Otherwise, medium term outlook will remain bearish.
In the long term picture, the corrective three wave structure of the rise from 1.4391 to 1.6827 is arguing that fall from 1.6827 is resumption of long term down trend from 1.8234. EUR/CHF's failure to take out 55 weeks EMA suggests that whole fall from 1.6827 is still in progress. A break of 1.4577 support will affirm this case and bring another low below 1.4315 to resume the long term down trend.
EUR/GBP Weekly Outlook :
EUR/GBP finally had a downside breakout from recent range last week and dropped to as low as 0.8809 last week. Initial bias remains on the downside this week and whole fall from 0.9410 should extend to 61.8% projection of 0.9410 to 0.8833 from 0.9153 at 0.8786 next and below. But we'd expect loss of momentum as EUR/GBP approaches 0.8704 support and bring reversal. On the upside, above 0.8883 minor resistance will turn intraday bias neutral and bring consolidations. But upside should be limited below 0.9027 resistance and bring another fall.
In the bigger picture, at this point, we're still favoring the case that medium term correction from 0.9799 has completed with three waves down to 0.8399 already. Rise from 0.8399 is possibly resuming the long term up trend. Hence, fall from 0.9410 is viewed as a correction only and should be contained by 0.8704 support. Break of 0.9027 resistance will suggest that correction from 0.9410 has completed and rise from 0.8399 is resuming for a test on 0.9799 high first and then 61.8% projection of 0.6535 to 0.9799 from 0.8399 at 1.0416.
However, break of 0.8704 support will argue that firstly, rise from 0.8399 has completed at 0.9410 already. Secondly, this will indicate that fall from 0.9410 is likely the third leg of the correction pattern that started at 0.9799 and could extend beyond 0.8399 support before the whole correction concludes.
In the long term picture, long term up trend in EUR/GBP might be resuming as correction from 0.9799 has completed at 0.8399. Decisive break of 0.9799 high will confirm this bullish view and target 261.8% projection of 0.5680 to 0.7258 from 0.6535 at 1.0666. Break of 0.8704 will delay the bullish view but we'd still expect the long term up trend to resume sooner or later as long as 0.8186 support holds.
EUR/JPY Weekly Outlook :
After edging higher to 134.36, EUR/JPY reversed and fell sharply to as low as 130.29. The development indicates that rise from 127.50 has completed at 134.36, ahead of 134.54 resistance on a small head and shoulder top pattern. Also, it suggests that recent price actions from 126.88 are merely consolidation to fall from 138.47 and should have completed too. Initial bias will remain on the downside this week and further decline should be seen to 126.88/127.50 support zone. On the upside, above 131.67 minor resistance will turn intraday bias neutral and bring consolidations. But recovery is expected to be limited well below 133.62 resistance and bring fall resumption.
In the bigger picture, EUR/JPY is still bounded in medium term range between 126.88 and 139.21 and outlook remains neutral for the moment. On the downside, a break of 126.88 support will revive that case that medium term rebound from 112.10 has completed at 139.21 already and down trend from 169.96 is resuming. In such case, we'd expect deeper fall to 112.10 and beyond to resume the long term down trend. On the upside, however, break of 134.54 resistance will revive that case that recent price actions are merely consolidations to medium term rise from 112.10 already and another high above 139.21 should be seen before EUR/JPY tops.
In the long term picture, up trend from 88.96 (00 low) has completed at 169.96 and made a long term top there. Subsequent price actions are either developing into resumption of the multi decade down trend from 285.56, or wide range corrective pattern. In either case, upside should be limited well below 169.96 high and we're expecting at least one more medium term fall after the current rise from 112.10 completes. The final structure of the rebound from 112.10 will provide more indication on whether a test on 88.96 low would be seen.
GBP/JPY Weekly Outlook :
GBP/JPY was bounded in choppy sideway trading in familiar range below 150.68 last week without making any progress. Initial bias remains neutral this week and some more sideway trading could be seen. Note that another rise cannot be ruled out with 146.64 minor support holds. Above 149.98 will bring rally to 150.68 or above. However, there is no change in the view that recent price actions from 139.96 are merely consolidations to fall from 163.05 only, with rise from 139.26 as the third leg. Hence, even in case of another rise, upside should be limited by 153.21 resistance and bring reversal. On the downside, below 146.64 minor support will suggest that rise from 139.26 has completed at 150.68 already and fall from there is resuming. Intraday bias will then be flipped back to the downside for 141.99 support for confirmation. And break there will target a retest on 139.26 low.
In the bigger picture, medium term rebound from 118.18, which is a correction to the long term down trend from 07 high of 251.90, has completed at 163.05 already. Fall from 163.05 is expected to resume after sideway consolidation from 139.69 completes and should target a new low below 118.81. However, note that sustained break of 61.8% retracement of 163.05 to 139.26 at 153.96 will argue that fall from 163.05 has finished already and will in turn indicate that rise from 118.81 is still in progress to another high above 163.05 before conclusion.
In the longer term picture, fall from 251.09 is treated as resumption of multi decade down trend. Note that the fall from 215.87 is not treated as the fifth wave, but the third wave inside the third wave that started at 241.35. On resumption, the down trend will extend to 61.8% projection of 215.87 to 118.81 from 163.05 at 103.03 next, which is close to 100 psychological support.
