EUR/JPY Weekly Outlook

EUR/JPY Weekly Outlook

EUR/JPY edged higher to 133.37 last week but faced strong resistance blow 133.80 and dropped sharply. Initial bias is neutral this week first. While another rise cannot be ruled out, we'd continue to expect strong resistance from 133.80 to limit upside and bring reversal to extend the consolidation from 133.80. Break of 130.97 will be an early signal that choppy rise from 124.95 has completed and will turn bias to the downside for 127.96 support for confirmation. However, sustained break of 133.80 will indicate resumption of larger rally and should target 140 psychological level next.

In the bigger picture, medium term up trend from 94.11 has topped out at 133.80 on bearish divergence condition in daily MACD. Consolidation from there could extend with another fall to 55 weeks EMA (now at 122.13) and below. But we'd expect strong support from 119.10 cluster support (38.2% retracement of 94.11 to 133.80 at 118.63) to contain downside. Considering the five wave structure of the rise from 94.11, we'd expect another medium term rally after completing the correction.

In the long term picture, the down trend from 169.96 is viewed as a corrective move and has finished at 94.11 already. Rebound from there is has an impulsive five wave look and thus, indicates that it's far from being finished. 139.21 should be taken out in medium to long term but we'll judge how far the rally from 94.11 could go at a latter stage.