EUR/JPY Weekly Outlook

EUR/JPY continued to hold above 131.00 support and had another rebound last week. At this point, we're still favoring the case that price actions from 131.00 are merely consolidation to fall from 138.70 only. Hence, while another rise cannot be ruled out this week, upside should be limited below 136.07 resistance to complete such consolidation. Below 133.40 minor support will flip intraday bias to the downside. FUrther break of 131.29 will indicate that fall from 138.70 has resumed and should target 127.08 key support next. However, note that break of 136.07 will dampen this bearish view and suggest that stronger rise is underway for a retest of 138.70 resistance instead.

In the bigger picture, we still favoring the case that price actions from 113.63, which are treated as correction to the larger fall from 08 high of 169.96, has completed at 139.21 already, after failing to sustain above 55 weeks EMA. This is supported by mild bearish divergence condition in daily MACD and with weekly MACD crossed below signal line. Decisive break of 127.08 support will confirm this bearish case and bring deeper decline to 112.10 low and beyond. On the upside, while another high above 139.21 cannot be ruled out, upside is expected to be limited by 141.73 cluster resistance (50% retracement of 169.96 to 113.63 at 141.79) and finally bring reversal.

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. In such case, we're looking at the prospect of a retest of 199 low of 88.96. We'll maintain this view as long as 141.73 cluster resistance holds.

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