USD/CAD's decline accelerated last week to as low as 1.2945. 1.2968 cluster support, 61.8% retracement of 1.2460 to 1.3793 at 1.2969 was already met but there is no clear sign of bottoming yet. Initial bias stays on the downside this week. As noted before, corrective rise from 1.2460 has completed at 1.3793 already. Sustained trading below 1.2968/9 will target 1.2460 next. On the upside, above 1.3045 minor resistance will indicate short term bottoming and bring rebound back to 1.3164 support turned resistance first.

In the bigger picture, price actions from 1.4689 medium term top are seen as a correction pattern. The second leg should have finished at 1.3793. Break of 1.2460 will tend such correction to 50% retracement of 0.9406 to 1.4869 at 1.2048. At this point, we'd look for strong support from there to contain downside and bring rebound. However, firm break there will target 100% projection of 1.4689 to 1.2460 from 1.3793 at 1.1564.

In the longer term picture, rise from 0.9056 (2007 low) is viewed as a long term up trend. It's taking a breath after hitting 1.4689. But such rise expected to resume later to test 1.6196 down the road. But firm break of 50% retracement of 0.9406 to 1.4869 at 1.2048 will raise doubt over this view.

GBP/JPY's sharp rise last week confirmed that pull back from 148.09 has completed at 138.65 already. With a temporary top in place at 146.52, intraday bias is neutral this week first for consolidation. But downside of retreat should be contained by 143.25 minor support and bring rally resumption. Above 146.52 will turn bias to the upside to retest 148.09/42 resistance zone. Decisive break there will extend whole rally from 122.36 to long term fibonacci level at 150.43 next.

In the bigger picture, rise from medium term bottom at 122.36 is expected to continue to 38.2% retracement of 196.85 to 122.36 at 150.43. Decisive break there will carry long term bullish implications and pave the way to 61.8% retracement at 167.78. In case the sideway pattern from 148.42 extends, we'd be looking for strong support from 135.58 and 50% retracement of 122.36 to 148.42 at 135.39 to contain downside.

In the longer term picture, it remains to be confirmed is whole down trend from 195.86 has completed at 122.36 already and there is no confirmation yet. But in any case, firm break of 38.2% retracement of 196.85 to 122.36 at 150.43 would pave the way to 61.8% retracement at 167.78. And with that, the 55 month EMA will be firmly taken out which suggests that price actions from 116.83 is indeed a sideway pattern that could last more than a decade.

EUR/JPY's rally resumed last week and surged to as high as 128.82. A temporary top is formed there and initial bias is neutral this week for consolidation. Downside of retreat should be contained by 126.47 support to bring rise resumption. Above 128.82 will target 61.8% projection of 114.84 to 125.80 from 122.39 at 129.16 first . That's also close to medium term projection level at 129.89.

In the bigger picture, the break of 126.09 support turned resistance should have confirmed completion of down trend form 149.76 (2014 high), at 109.03 (2016 low). Current rise from 109.03 should target 100% projection of 109.03 to 124.08 from 114.84 at 129.89 first. Break there will pave the way to 61.8% retracement of 149.76 to 109.03 at 134.20 and above. Medium term outlook will now remain bullish as long as 122.39 support holds.

In the long term picture, the down trend from 149.76 should have completed at 109.03 already. At this point, there is 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 higher to 0.8879 last week but failed to sustain above 0.8851 resistance and retreated. Initial bias is neutral this week first. On the upside, break of 0.8718 support will argue that rise from 0.8312 has completed. In that case, intraday bias with be turned back to the downside for lower side of the range at 0.8312. Meanwhile, break of 0.8879 and sustained trading above 0.8851 will pave the way to retest 0.9304 high.

In the bigger picture, price actions from 0.9304 are viewed as a medium term corrective pattern. It's uncertain whether it is finished yet. But in case of another fall, we'd expect strong support from 0.8116 cluster support (50% retracement of 0.6935 to 0.9304 at 0.8120) to contain downside and bring rebound. Whole up trend from 0.6935 is expected to resume after consolidation from 0.9304 completes.

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 to target 0.9799 high and above.

EUR/AUD jumped to as high as 1.4997 last week but lost momentum there and retreated. Initial bias remains neutral this week. As long as 1.4813 minor support holds, we're favoring the bullish case that pull back from 1.5226 has completed at 1.4625, ahead of 38.2% retracement of 1.3624 to 1.5226 at 1.4614. Above 1.4997 will turn bias back to the upside for 1.5226 first. However, break of 1.4813 will dampen this view and turn bias back to the downside for 1.4625 support.

In the bigger picture, price actions from 1.6587 medium term top are viewed as a corrective pattern. Such correction should be completed at 1.3624 after defending 1.3671 key support. Rise from 1.3642 would extend to 61.8% retracement of 1.6587 to 1.3624 at 1.5455. Sustained break there will pave the way to retest 1.6587. However, sustained break of 1.4669 support will dampen this bullish view. We'll assess the outlook later after looking at the structure and depth of the pull back.

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 strong rebound last week indicates that corrective pull back from 1.0986 has completed at 1.0830, after drawing support from 55 day EMA. Initial bias remains on the upside this week for 1.0986/99 resistance zone. Break there will resume whole rise from 1.0629 and target 61.8% projection of 1.0652 to 1.0986 from 1.0830 at 1.1036. On the downside, below 1.0920 minor support will turn bias neutral and bring retreat before staging another rally.

In the bigger picture, the price actions from 1.1198 are seen as a corrective move. Such correction could have completed after defending 38.2% retracement of 0.9771 to 1.1198 at 1.0653. Decisive break of 1.0999 resistance will target a test on 1.1198 high. For now, this will be the preferred case as long as 1.0830 support holds.

GBP/JPY's sharp rise last week confirmed that pull back from 148.09 has completed at 138.65 already. With a temporary top in place at 146.52, intraday bias is neutral this week first for consolidation. But downside of retreat should be contained by 143.25 minor support and bring rally resumption. Above 146.52 will turn bias to the upside to retest 148.09/42 resistance zone. Decisive break there will extend whole rally from 122.36 to long term fibonacci level at 150.43 next.

In the bigger picture, rise from medium term bottom at 122.36 is expected to continue to 38.2% retracement of 196.85 to 122.36 at 150.43. Decisive break there will carry long term bullish implications and pave the way to 61.8% retracement at 167.78. In case the sideway pattern from 148.42 extends, we'd be looking for strong support from 135.58 and 50% retracement of 122.36 to 148.42 at 135.39 to contain downside.

In the longer term picture, it remains to be confirmed is whole down trend from 195.86 has completed at 122.36 already and there is no confirmation yet. But in any case, firm break of 38.2% retracement of 196.85 to 122.36 at 150.43 would pave the way to 61.8% retracement at 167.78. And with that, the 55 month EMA will be firmly taken out which suggests that price actions from 116.83 is indeed a sideway pattern that could last more than a decade.

Sterling, Canadian Dollar and Euro surged broadly last week on hawkish comments from central bankers. The turn in BoE Governor Mark Carney was the most drastic as just a week a go, he said it's not the time of rate hike yet. But then, he indciated the BoE MPC will start debating raising interest rate in the coming months. BoC Governor Stephen Poloz repeated his comments that prior rate cuts in 2015 have already done their job. But this time, Poloz hinted that BoC is approaching a new interest rate decision. That tremendously raised the odds of a July hike by BoC. There were some jitters on Euro on report that markets misinterpreted ECB President Mario Draghi's comments. But after all, it's generally convinced that, with improvements in Eurozone inflation and growth, ECB is transiting into a phase of stimulus withdrawal. And there would likely be tapering announcement in September or by latest October.

On the other hand, Yen ended the week as the weakest one as BoJ is generally expected to maintain its stimulus as inflation at 0.4% yoy is still far off it's 2% target. Also, global bond yields jumped sharply, giving additional pressure to the Yen. Dollar followed as the second weakest one as markets continued to doubt if Fed, or the US economy, is ready for another rate hike in September. In particular, investors are very dissatisifed with the pace of US President Donald Trump's work on pushing through his economic policies. Trump's administration is still stuck with healthcare reform for the moment. And the US President himeself is continuously engaging in things that distract him from working on the economy. IMF's downgrade of US economic forecast, citing the removal of assumed fiscal stimulus, is a clear sign that economists are giving up.

Yen decoupling from risk aversion

One of the developments in the financial markets caught most of our attention. That is the decoupling of Yen and stocks. Global equities tumbled sharply on expectation of monetary policy tightening ahead. But this time, there was no risk aversion boost to the Yen seen, nor on Swiss Franc. This could be a sign that widening yield spread and their attraction on carry trades is finally back after the years. And yield spread could be starting to have a much stronger impact on the Yen than risk sentiments.

For example, the near term outlook in DAX is certainly quite bad. The sharp fall in DAX last week dragged weekly MACD further below signal line and suggests medium term top was already formed at 12951.54. While some recovery might be seen, the index could now be heading back to key near term fiboaccci level at 38.2% retracement of 10174.92 to 12951.54 at 11890.87, which is close to medium term channel support. Reactions from there will be crucial to whether the medium term up trend is still intact. For the moment, we're not medium term bearish in DAX yet. But bearish divergence in weekly MACD does give us something to worry about.

We've pointed out the risk of trend reversal in FTSE too and it did tumbled sharply. Nonetheless, it was driven by the surge in Sterling and policy tightening, which was out of our expectations. Overall, we maintain the view that 7598.99 could be the medium term top already, after completing a rising wedge structure, on bearish divergence condition in daily MACD. Looking at the bigger picture, bearish divergence condition is also see in weekly MACD. And more improtantly, the index had jsut failed to break through long term channel resistance firmly. It would now gyrate back to 7093.56 important level where some strong support could be seen. While it's still early to judge, firm break of 7093.56 and 55 week EMA (now at 7079.42) could indciate that start of a medium term down trend back to lower channel support below 6000 handle.

For the US markets, we've talked about the bearish development in NASDAQ during the week. Let's take a look at S&P 500. Last week's fall in S&P 500 wasn't too bad as it drew support from 55 day EMA. But the larger picture argues that the up trend in S&P 500 is losing much steam. Mild bearish divergenc condition is seen in weekly MACD. And more importantly, it's now quite close to long term projection of 61.8% projection of 1074.77 to 2134.71 from 1810.10 at 2465.14. It's still early to tell but risk of reversal is increaseing. A break of 55 day EMA (now at 2406.92) will put key medium term support at 2322.25. In case of another rise, S&P 500 might start to feel heavy as it approaches 2465.14.

TNX rebounded following global yield surge

Staying in the US, 10 year yield's strong rebound last week suggests that medium term correction from 2.621 has completed at 2.103. That was after drawing support from 38.2% retracemnent of 1.336 to 2.621 at 2.130 and 55 week EMA. Near term focus is now back on 2.423 resitsance. Break there will bring retest of 2.621 high. However, we'd like to point out that rebound in TNX was mainly driven by surging global yields, not by Fed rate expectations. This is reflected in the lack of strength in Dollar last week. So, not until Fed is more certain on its rate path, 2.621 will likely cap upside in TNX. And that would be accompanied by the lack of persistent strength in Dollar's rebound.

Dollar index in medium term move to 91.91/93

Talking about Dollar, the dollar index extended the medium term decline from 103.82 and reached as low as 95.47 last week. EUR/USD's strong break of 1.13 resistance last week is in line with the case that dollar index is in a long term correction. That is, fall from 103.82 is correcting whole up trend from 2011 low at 72.69 to 2017 high at 103.82. Outlook will stay bearish as long as 97.87 resitsance holds. Dollar index would target key cluster support level at 91.91, (38.2% retracement of 72.69 to 103.82 at 91.93), before getting enough support for sustainable rebound.

Strategy: Stay USD/CAD short with tight stop, close EUR/GBP long, Buy GBP/JPY on dip

Regarding trading strategy, we are short in USD/CAD (sold at 1.3510). Target of 1.2968 key cluster support was already met. A rebound could be due on deep oversold condition in daily RSI. Nonetheless, the Canadian Dollar seems to be getting extra support from the rebound in oil price. WTI crude oil closed at 46.04, comparing to prior week's low at 42.05. In the very near term, it looks like there is more upside potential in oil which might squeeze a bit more from USD/CAD. Hence, we'll stay short in USD/CAD but lower the stop to very tight level at 1.3010 and see if we can get an extra 100 or 200 pips out of it. But still, we maintain that fall from 1.3793 is resuming the whole decline from 1.4689 and should take out 1.2460 low eventually. Hence, even if the position is stopped, we'll look for sellling opportunity again, but at a later stage.

We're also long in EUR/GBP (bought at 0.8740, stop at 0.8640). It looked like EUR/GBP was finally taking out 0.8851 resitasnce to 0.9304 high following ECB Draghi inpsired up move. But then , thanks to BoE Carney, EUR/GBP settled back into establised range. The bullish case for EUR/GBP, ECB and BoE divergence, no longer exists and the risk of reversal after failing 0.8851 is increasing. We'll close the position at market this week.

Meanwhile, we'll look at Yen short oppuntinies this week as we believe the theme of widening yield spread on monetary stimulus exit and return of carry trade will continue. In addition, there could be additional boost to the Yen if global stocks are not as beraish as we thought. Looking at what to buy against Yen, we'll firstly avoid Dollar. At this point, we're staying bullish in EUR/AUD and expecting the rise from 1.4625 to extend to 1.5226. AUD/CAD also breached 0.9923 support last week and looks set to head lower. Hence, we'll avoid Aussie. CAD/JPY looks like a good candidiate with EUR/CAD also displaying a tendence to extend the fall from 1.5257. But since we already have a CAD position, we'd prefer not to add more bet on it.

Comparing EUR/JPY and GBP/JPY, the former is clearly the more bullish one as 124.08 resistance was taken out early this year. GBP/JPY struggled below equivalent resistance at 148.42. In most circumstances, EUR/JPY is preferred to GBP/JPY. However, firstly, Sterling was lifted by quite a drasitic turn in BoE Carney's stance which changed the fundamental outlook. Secondly, as mentioned above, there is chance of a near term reversal in EUR/GBP after being rejected from 0.8851. Hence, we'd choose to buy GBP/JPY this week for a catch up. We'll buy GBP/JPY on dip to 144.00 with stop at 142.50. We're expectin the whole rise from 2016 low at 122.36 to resume as a medium term move after taking out 148.42 resistance later.

GBP/JPY Weekly Outlook

GBP/JPY's sharp rise last week confirmed that pull back from 148.09 has completed at 138.65 already. With a temporary top in place at 146.52, intraday bias is neutral this week first for consolidation. But downside of retreat should be contained by 143.25 minor support and bring rally resumption. Above 146.52 will turn bias to the upside to retest 148.09/42 resistance zone. Decisive break there will extend whole rally from 122.36 to long term fibonacci level at 150.43 next.

In the bigger picture, rise from medium term bottom at 122.36 is expected to continue to 38.2% retracement of 196.85 to 122.36 at 150.43. Decisive break there will carry long term bullish implications and pave the way to 61.8% retracement at 167.78. In case the sideway pattern from 148.42 extends, we'd be looking for strong support from 135.58 and 50% retracement of 122.36 to 148.42 at 135.39 to contain downside.

In the longer term picture, it remains to be confirmed is whole down trend from 195.86 has completed at 122.36 already and there is no confirmation yet. But in any case, firm break of 38.2% retracement of 196.85 to 122.36 at 150.43 would pave the way to 61.8% retracement at 167.78. And with that, the 55 month EMA will be firmly taken out which suggests that price actions from 116.83 is indeed a sideway pattern that could last more than a decade.

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