EUR/JPY Weekly Outlook

EUR/JPY fell sharply to as low as 120.69 last week and the strong break of 124.35 support further affirm our view that medium term rebound from 112.10 has already completed at 139.21. Initial bias remains on the downside this week and sustained trading below 61.8% projection of 134.36 to 124.73 from 126.96 at 121.00 will set the stage for 100% projection at 117.33 next. On the upside, above 123.28 minor resistance will turn intraday bias neutral and bring consolidations. But upside should be limited below 129.96 resistance and bring fall resumption.

In the bigger picture, medium term rebound from 112.10, which is treated as a correction to long term down trend from 2008 high of 169.96, should have completed at 139.21 already, after multiple failure to sustain above 55 weeks EMA. Current decline is tentatively treated as resumption of the down trend and should target a new low below 112.10. On the upside, break of 126.88 support turned resistance is needed to be the first signal of bottoming. Otherwise, medium term outlook will remain bearish.

In the long term picture, up trend from 88.96 (00 low) has completed at 169.96 and made a long term top there. Fall from 169.96 should develop into a three wave correction with first wave completed at 112.10, second wave completed at 139.21. Current fall is likely the third wave and should extend beyond to 61.8% projection of 169.96 to 112.21 from 139.21 at 103.45 or further to 100 psychological support next.

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