EUR/JPY Weekly Outlook

EUR/JPY failed mentioned 125.22 cluster resistance (38.2% retracement of 134.36 to 119.64 at 125.26) last week and subsequent sharp fall suggests that choppy recovery from 119.64 has completed at 125.19 already. Initial bias will remain on the downside this week and further fall should be seen to retest 119.64 low first. Break will confirm that recent decline has resumed and should target 61.8% projection of 134.36 to 119.64 from 125.19 at 116.09 next. On the upside, above 123.73 minor resistance will delay the bearish case and turn intraday bias neutral again. But after all, we'd continue to expect strong resistance at 125.22/26 to conclude the corrective rise from 119.64 and bring down trend resumption.

In the bigger picture, there is no change in our bearish view. That is, 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. Recent decline is expected to resume sooner or later to a new low below 112.10. However, note that decisive break of 125.22 cluster resistance will argue that recent fall might have completed already. Further break of 126.88 support turned resistance will argue that medium term rise from 112.10 might be still in progress for another high above 139.21 before completion.

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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