EUR/JPY Weekly Outlook

EUR/JPY rose further to as high as 130.46 last week but upside momentum is seen diminishing with mild bearish divergence conditions in 4 hours MACD and RSI. Considering that the cross is now near to key medium term resistance of 131.03, intraday outlook remains neutral for the moment. Below 127.98 will indicate that an intraday top is at least formed and flip bias back to the downside. Further break of 122.09 will suggest that whole rise from 112.10 has likely completed and should then bring retest of this low. However, decisive break 131.03 will argue that rise from 112.10 is developing into larger scale rally and will revive short term bullish outlook.

In the bigger picture, while the rise from 112.10 might be strong, it's still limited below 131.03 resistance. As discussed before, with 131.03 resistance intact, current rebound from 112.10 is treated as part of sideway consolidation that started at 113.63. In such case, medium term outlook is still bearish. Failure at the current level, followed by break of 122.09 support will firstly suggest rise from 112.10 has completed and argue that medium term down trend is ready to resume for 76.4% retracement of 88.97 to 169.96 at 108.08 next. However, decisive break of 131.03 key resistance will argue that EUR/JPY has indeed bottomed out at 112.10 and much stronger rebound should then be seen targeting 141.73 resistance next.

In the long term picture, the three wave corrective structure of the up trend from 88.97 (00 low) to 169.96 suggests that it's merely a correction to the multi decade down trend from 285.56. The impulsive nature of the fall from 169.96 indicates that it's likely resuming the down trend. Focus now will be on whether the whole down trend from 169.96 will extend to retest 88.97 low. Above mentioned 131.03 resistance is needed to invalidate this long term bearish view.

Subscribe to our daily and mid-day newsletter to get this report delivered to your mail box