GBP/JPY's recovery from 146.92 extended last week but it hasn't taken out 149.73 resistance decisively yet. Initial bias remains neutral first. Another fall is expected as long as 149.73 holds. Below 146.92 will target 61.8% retracement of 139.29 to 152.82 at 144.45. Such decline is seen as a correction and we'd look for strong support from 144.45 to bring rebound. On the upside, firm break of 149.73 support turned resistance will argue that the pull back is completed and turn bias back to the upside for retesting 152.82 high. However, sustained break of 144.45 will put 139.29 key support in focus.

In the bigger picture, medium term rebound from 122.36 is still expected to resume after corrective pull back from 152.82 completes. Firm break of 38.2% retracement of 196.85 to 122.36 at 150.43 will carry long term bullish implications. In that case, GBP/JPY could target 61.8% retracement at 167.78. However, break of 139.29 will indicate rejection from 150.43 key fibonacci level. And the three wave corrective structure of rebound from 122.36 will argue that larger down trend is resuming for a new low below 122.26.

In the longer term picture, current rebound argues that the down trend from 195.86 (2015 high) has already completed at 122.36. Focus is now on 55 month EMA (now at 155.14). Firm break there will suggest that rise form 122.36 is developing into a long term move that target 195.86 again. And, price actions from 116.83 (2011 low) is indeed a sideway pattern that could last more than a decade. However, firm break of 139.29 will suggests that the long term down trend is still in progress and could break 116.83 low ahead.

EUR/JPY drew support from 131.69 and rebounded last week but it's after all staying in recently established range of 131.69/134.39. Initial bias remains neutral this week first. On the upside, decisive break of 134.39 high will confirm up trend resumption. In such case, EUR/JPY should target 141.04 long term resistance. However, firm break of 131.69 will be an early sign of medium term reversal and will target 127.55 key support level.

In the bigger picture, medium term rise from 109.03 (2016 low) is seen as at the same degree as the down trend from 149.76 (2014 high) to 109.03 (2016 low). 61.8% retracement of 149.76 to 109.03 at 134.20 is already met. Sustained break there will pave the way to key long term resistance zone at 141.04/149.76. However, break of 127.55 support will argue that the medium term trend has reversed and will turn outlook bearish for deeper fall.

In the long term picture, at this point, there is no clear indication that rise from 109.03 is resuming that from 94.11. Hence, we'd be cautious on topping below 149.76 to extend range trading. Nonetheless, firm break of 149.76 will indicates strong underlying buying. In such case, EUR/JPY will target 100% projection of 94.11 to 149.76 from 109.03 at 164.68.

EUR/GBP edged lower to 0.8857 last week but turned into sideway trading since then. Initial bias remains neutral this week first. At this point, price actions from 0.8745 are viewed as a corrective pattern. As long as 61.8% retracement of 0.9305 to 0.8745 at 0.9091 holds, deeper fall is in favor. Below 0.8857 minor support will turn bias to the downside. Further break of 0.8745 will resume whole decline form 0.9305 and target 0.8303 key support level. Nonetheless, sustained break of 0.9091 will bring retest of 0.9305 instead.

In the bigger picture, there are various ways to interpret price actions from 0.9304 high. But after all, firm break of 0.9304/5 is needed to confirm up trend resumption. Otherwise, range trading will continue with risk of another fall. And in that case, EUR/GBP could have a retest on 0.8303. But we'd expect strong support from 0.8116 cluster support (50% retracement of 0.6935 to 0.9304 at 0.8120) to contain downside.

In the long term picture, firstly, price action from 0.9799 (2008 high) is seen as a long term corrective pattern and should have completed at 0.6935 (2015 low). Secondly, rise from 0.6935 is likely resuming up trend from 0.5680 (2000 low). Thirdly, this is supported by the impulsive structure of the rise from 0.6935 to 0.9304. Hence, after the correction from 0.9304 completes, we'd expect another medium term up trend through 0.9799 to 100% projection of 0.5680 to 0.9799 from 0.6935 at 1.1054.

EUR/AUD was bounded in tight range between 1.4945/5101 last week and outlook is unchanged. Initial bias stays neutral this week first. Fall from 1.5241 is seen as the third leg of the consolidation pattern from 1.5226. Another decline is in favor as long as 1.5101 minor resistance holds. Break of 1.4945 will target 1.4791 support and possibly further to 1.4421. On the upside, though above 1.5101 will turn focus back to 1.5241 resistance instead.

In the bigger picture, we're holding on to the view that corrective decline from 1.6587 medium term top has completed at 1.3624. Rise from 1.3624 is expected to extend to retest 1.6587. The corrective structure of the price actions from 1.5226 is affirming this view. Sustained trading above 1.5226 will target a test on 1.6587 key resistance. However, break of 1.4421 support will dampen our view and would drag EUR/AUD lower to retest key support zone around 1.3624.

In the longer term picture, the rise from 1.1602 long term bottom isn't over yet. We'll keep monitoring the development but there is prospect of extending the rise to 61.8% retracement of 2.1127 to 1.1602 at 1.7488 and above. However, sustained trading below 1.3671 should confirm trend reversal and target 1.1602 long term bottom again.

EUR/CHF's break of 1.1622 resistance argues that medium term rally is resuming. Initial bias is cautiously on the upside for further rally. Sustained break of 1.1622 will pave the way to 1.2 key level. On the downside, below 1.1523 will dampen this bullish case and turn bias to the downside for 1.1387 instead. In that case, consolidation from 1.1622 will extend for a while.

In the bigger picture, long term rise from SNB spike low back in 2015 is still in progress. EUR/CHF should now be heading back to prior SNB imposed floor at 1.2000. For now, this will be the favored case as long as 1.1198 resistance turned support holds.

Dollar surged broadly last week as Republican's tax plan overcame another hurdle. The news also sent DOW and S&P 500 to new records, with upside acceleration. Accompanying that, treasury yields closed sharply higher, reversing prior week's loss. Technical development in Dollar was not totally convincing yet. NZD/USD led the way lower as markets were unhappy with the new labour-led coalition in New Zealand. USD/CAD followed after disappointing economic data. Solid risk appetite also pushed USD/JPY and USD/CHF near term resistance to resume recent rally. But EUR/USD was kept in range only, showing much resilience in spite of political turmoil in Catalonia. GBP/USD was also held in range with support from some positive news regarding Brexit. AUD/USD also stays in recently established range.

A number of key events will be closely watched this week. The list include election in Japan on Sunday, Catalonia standoff and BoC rate decision. Nonetheless, the more market moving event should be ECB rate decisions where the central bank could announce to extending the asset purchase program but half the purchase size. Q3 GDP from UK and US will also trigger some volatility in the markets. In addition, there could be unscheduled news regarding US President Donald Trump's choice of next Fed chair, as well as news on the tax plan.

Dollar index gyrated around 55 day EMA - a bullish sign

Dollar index's gyration around a flat 55 day EMA is taken as a bullish sign. That is, rebound from 91.01 maybe not completed yet. Of course, in the background, there is bullish divergence condition seen in daily MACD. And, DXY breached 91.91/93 key long term support briefly (38.2% retracement of 72.69, 2011 low, to 103.82, 2016 high). Focus could now be back on 94.14/26 resistance zone this week. Decisive break there will confirm medium term reversal and target 38.2% retracement of 103.82 to 91.01 at 95.90.

10 year yield to take on 2.396/402 resistance again

This is also supported by the development in 10 year yield. TNX's pull back from 2.402 is possibly completed at 2.273, comfortably above 55 day EMA. Focus is now back on 2.396/402 resistance zone. Decisive break there will confirm that whole medium term correction from 2.621 has completed at 2.034, ahead of 50% retracement of 1.336 (2016 low) to 2.621 (2017 high) at 1.978. In that case, TNX would target a test on 2.621 key resistance next. And such development would be Dollar positive and Yen negative.

DOW up trend accelerated further

The above development was accompanied by recent acceleration in US stocks. DOW made another record close at 23328.62. Based on current momentum, DOW should now target 100% projection of 20379.55 to 22179.11 from 21731.12 at 23530.68. There is prospect of hitting 161.8% projection at 24642.80 in medium term. Such development will be Dollar and yield positive, and Yen negative.

USD/JPY in bullish development

Taking a look at USD/JPY, last week's breach of 113.43 resistance suggests that rebound from 107.31 is resuming. More importantly, the development revives that case that correction from 118.65 has completed at 107.31 already. Immediate focus will be on 114.49 resistance this week. Sustained break there should at least send USD/JPY through 118.65 to 61.8% projection of 98.97 to 118.65 from 107.31 at 119.47. If the strength in yields and stocks carries on as noted above, USD/JPY should indeed break 125.85 to 100% projection at 126.99.

Trading strategies

Based on the above analysis on stocks, yield, Dollar index and USD/JPY, we'd buy USD/JPY at market this week with a stop at 112.50, slightly below 4 hour 55 EMA. Decisive break of 114.49 resistance will be the first affirmation of our bullish call. And, we'd initially look at 118.65 as first target, but keep an eye on the chance to hit 125.85 and above.

We're holding on to CAD/JPY long position (bought at 89.90). The cross hit as high as 90.76 but was weighed down by disappointing Canadian data. Still as price actions from 91.62 are corrective looking. And the cross did draw support from rising 55 day EMA. We're holding on to our bullish view and will keep the position, with stop at 88.50. Break of 91.62 will extend to the rise to our first target of 61.8% retracement of 106.48 to 74.80 at 94.37 and above.

USD/CHF Weekly Outlook

USD/CHF's break of 0.9835 resistance last week indicates that rebound from 0.9420 is resuming. More importantly, this affirmed the case that medium term fall from 1.0342 has finished at 0.9420. Initial bias stays on the upside this week for 61.8% retracement of 1.0342 to 0.9420 at 0.9990. Sustained break there will pave the way to retest 1.0342 high. However, break of 0.9736 support will mixed up the near term outlook and turn bias back to the downside for 0.9587 support instead.

In the bigger picture, current development suggests that USD/CHF has defended 0.9443 (2016 low) key support level again. Rise from 0.9420 could develop into a medium term move and target a test on 1.0342 high. This represents the upper end of a long term range that started back in 2015. On the downside, break of 0.9587 support is now needed to indicate completion of the rise from 0.9420. Otherwise, further rally will remain in favor in medium term.

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