EUR/JPY Weekly Outlook

EUR/JPY dived further to as low as 126.07 initially last week and turned into consolidation since then. While some more consolidation cannot be ruled out, upside should be limited below 130.96 resistance and short term outlook remains bearish. As discussed before, whole rally from 112.10 should have completed at 137.38 already. Sustained trading below 126.40 support will confirm this case and target 121.72 cluster support (61.8% retracement of 112.10 to 137.38 at 121.75) next. Break will bring retest of 112.10 low.

In the bigger picture, note that the whole down trend from 08 high of 169.96 has either bottomed at 113.63 or 112.10. The main question now is whether subsequent multi-month consolidation has completed at 137.38 or not. Current focus will now be on 121.72 cluster support as well as the structure of fall from 137.38. In any case, strong break of 121.72 will build up the case that fall from 137.38 is resuming the medium term down trend and in such case, we'll look forward to break of 112.10 low ahead.

Nevertheless, note that firstly a break of 130.96 resistance will argue that fall from 137.38 has completed and rise from 112.10 is indeed still in progress. Secondly, strong rebound from 121.72 will open up the case for more medium term consolidation before down trend resumption.

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. And hence, such down trend is still expected to resume after completing the current medium term consolidation.

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