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A note on lower timeframe confirming price action...

Waiting for lower timeframe confirmation is our main tool to confirm strength within higher timeframe zones, and has really been the key to our trading success. It takes a little time to understand the subtle nuances, however, as each trade is never the same, but once you master the rhythm so to speak, you will be saved from countless unnecessary losing trades. The following is a list of what we look for:

• A break/retest of supply or demand dependent on which way you're trading.
• A trendline break/retest.
• Buying/selling tails ... essentially we look for a cluster of very obvious spikes off of lower timeframe support and resistance levels within the higher timeframe zone.
• Candlestick patterns. We tend to only stick with pin bars and engulfing bars as these have proven to be the most effective.

We typically search for lower-timeframe confirmation between the M15 and H1 timeframes, since most of our higher-timeframe areas begin with the H4. Stops are usually placed 1-3 pips beyond confirming structures.

EUR/USD

Weekly gain/loss: – 3 pips

Weekly closing price: 1.1192

Over the past five weeks, we have seen the weekly candles cling to the underside of a major weekly supply at 1.1533-1.1278. Overlooking this zone is not something we'd advise considering that it has been in play since May 2015, and held price lower on several occasions since then. Should the bears eventually gain traction here, the next port of call will likely be the 2016 yearly opening level penciled in at 1.0873.

A closer look at price action on the daily timeframe shows the past five weeks of trading has been confined between a demand area coming in at 1.1075-1.1158 and a supply zone pegged at 1.1327-1.1253 (glued to the underside of the said weekly supply base).

A quick recap of Friday's trading on the H4 chart reveals that the bulls went on the offensive from the mid-level support at 1.1150, and ended the week shaking hands with the 1.12 neighborhood. The move, as you can see, also completed a H4 AB=CD (see black arrows) 127.2% ext. at 1.1193 taken from the low 1.1119, and connected with a 50.0% retracement value at 1.1207 drawn from the high 1.1295.

Our suggestions: Given that all of the above noted H4 structures are lodged within the walls of a H4 supply zone carved from 1.1212-1.1190, and considering the position of price on the weekly chart (see above), our team believes a downside move may take place from here today. The closing candle, at least for us, is enough confirmation to sell. Therefore, depending on the open, we will short, with stops placed above H4 supply at 1.1214 and look to initially target 1.1150.

Data points to consider: German IFO business climate at 9am, ECB President Draghi speaks at 6.30pm. US durable goods orders at 1.30pm GMT+1.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: Looking to short at current price with stops placed at 1.1214.

GBP/USD:  

Weekly gain/loss: – 57 pips

Weekly closing price: 1.2718

While it's clear to see that weekly action remains capped beneath weekly resistance at 1.2789, last week's buying tail is concerning. Should the bears regain consciousness, nonetheless, it's possible that price will cross swords with the weekly trendline support extended from the high 1.2774.

Wednesday's reaction from the 61.8% daily Fib support at 1.2625 taken from the low 1.2365 extended its bounce on Friday and came within striking distance of daily supply seen at 1.2818-1.2752. Bearing in mind that this area encapsulates the said weekly resistance level, this will be a key zone to keep an eye on this week we believe. An area of concern should the bears kick it up a gear, however, is the nearby support level coming in at 1.2673.

As expected, H4 price blew through the 1.27 handle on Friday. Consequent to this, a truckload of stop-loss orders were likely triggered, leaving the unit free to challenge the supply registered at 1.2758-1.2728. For those who read Friday's report you may recall that this area was of interest to our desk given the following confluence: a H4 mid-level resistance level at 1.2750, a 61.8% H4 Fib resistance at 1.2728 taken from the high 1.2814, a H4 AB=CD 127.2% ext. at 1.2745 taken from the low 1.2589 and also the fact that the area is glued to the underside of the aforementioned daily supply zone!

Our suggestions: Taking a short position at current prices is tempting considering the confluence surrounding the said H4 supply. This would, however, entail you selling into the nearby 1.27 handle, which, of course, could throw a spanner in the works and halt selling.

As a result, we have to take the side of caution here and will therefore wait for H4 price to close below 1.27. Only then will we be comfortable shorting this market and targeting the H4 mid-level support at 1.2650 as an initial take-profit zone.

Data points to consider: US durable goods orders at 1.30pm GMT+1.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: Watch for H4 price to close beyond 1.27 and then look to trade any retest seen thereafter ([waiting for a H4 bearish candle to form following the retest is advised prior to pulling the trigger] stop loss: ideally beyond the candle's wick).

AUD/USD:  

Weekly gain/loss: – 48 pips

Weekly closing price: 0.7568

Breaking a three-week bullish phase, weekly price recently slammed on the brakes and reversed following a marginal close above supply pegged at 0.7610-0.7543. Therefore, we believe this area is very likely the victim of a fakeout, and thus could encourage further selling to take shape this week.

On the daily timeframe, nevertheless, we can see that price recently stamped in a bullish candle from a support area located at 0.7556-0.7523. This move wiped out all of Thursday's and most of Wednesday's losses, and could, if it continues on its path north, bring the pair up to supply at 0.7679-0.7640.

Looking over to the H4 candles, price appears to have ended the week in a rather problematic spot, as far as structure is concerned. Trade closed above the resistance area seen at 0.7571-0.7557, which is now acting as a support area, but also failed to break above the nearby supply which sits just on top of this zone at 0.7585-0.7570. Essentially a decision needs to be made here.

Our suggestions: On account of the above, this is what we have logged so far:

If H4 price punches north and closes above the current supply, then the candles may look to approach April's opening level at 0.7632, which happens to be located a few pips beneath the noted daily supply.

Assuming that the current H4 support area gives way, there's not much room for price to stretch its legs. Close by is a H4 Quasimodo support at 0.7543, followed by support at 0.7524.

Neither a long nor short seems attractive at this time. Taking a long on the break of the current H4 supply could end in tears since you'd effectively be buying into potentially weekly sellers. By the same token, a short beyond the current H4 support area would entail you selling into possible daily buyers from demand, alongside having little leg room down to 0.7543.

Data points to consider: US durable goods orders at 1.30pm GMT+1.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: Flat (stop loss: N/A).

USD/JPY:  

Weekly gain/loss: + 43 pips

Weekly closing price: 111.29

With weekly price recently finding a floor of support around the 110.30 mark, we see two possible scenarios on the weekly timeframe at the moment:

To the downside, a weekly AB=CD correction (see black arrows) that terminates within a weekly support area marked at 105.19-107.54 (stretches all the way back to early 2014) may form in the coming weeks.
To the upside, nonetheless, we also have a potential weekly AB=CD correction (see pink arrows) that completes within supply pegged at 115.50-113.85 that capped upside beautifully in early May.
Since Tuesday last week, the daily candles have been clinging to the underside of a daily resistance area penciled in at 111.35-112.37. This zone has been active since late January, so it is certainly not a base one should ignore. Providing that this area remains in position, the next downside target from here can be seen at 109.11: a Quasimodo support level.

A brief look at recent dealings on the H4 timeframe has seen price chalk up a bullish pennant formation (110.64/111.78). This pattern is typically considered to be a continuation pattern and therefore could see the unit breakout to the upside today. With little active supply seen until the 112 handle, which also merges with a left shoulder i.e. a H4 Quasimodo pattern at 112.05 (see the pink arrow), this is likely where price will head in the event of a breakout north. Also of particular interest is the fact that 112 is sited within the upper edge of the aforementioned daily resistance area, and also merges closely with a potential H4 AB=CD (black arrows) 127.2% ext. at 112.09 taken from the low 110.64.

Our suggestions: On the basis that H4 price does indeed breakout to the north today/early this week, 112 will be a level our team will look to short. Seeing as our desk is conservative, stops will be positioned beyond the current daily resistance area at 112.39. This will give the trade room to breathe should it come to fruition, and give price the best chance of correcting back down to at least 111.41: April's opening level (initial take-profit target).

Data points to consider: US durable goods orders at 1.30pm GMT+1.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: 112 (stop loss: 112.39).

USD/CAD

Weekly gain/loss: + 56 pips

Weekly closing price: 1.3268

Weekly demand at 1.3223-1.3395 remains under pressure. Weekly bulls did, however, attempt to advance but failed to cover much ground. In the event that the bears remain dominant here, odds are that the weekly demand base pegged below at 1.3006-1.3115, which happens to intersect with a weekly trendline support extended from the high 1.1278, will see some action.

On the other side of the coin, daily flow continues to be bolstered by a support level penciled in at 1.3212. A decisive push below the said support line could lead to a move being seen down to demand at 1.3050-1.3103 (housed within the weekly demand mentioned above at 1.3006-1.3115).

Since the 14th of June, the H4 candles have been in correction mode, forming a nice-looking ascending channel formation (1.3165/1.3308). The week ended with price modestly fading the 1.3312/1.33 green zone (comprised of March/April's opening levels at 1.3312/10 and the psychological band 1.33), following an aggressive move to the upside in response to lower-than-expected Canadian inflation figures. From our perspective, it's difficult to believe that this channel will continue its upwardly path. Not only do we have daily resistance at 1.3272 now in play, but let's also not forget that the current weekly demand is hanging on by a thin thread at the moment.

Our suggestions: Ultimately, to confirm bearish intent, we would want to see H4 price close below both the channel support and the 1.32 handle. This – coupled with a retest and a reasonably sized H4 bearish candle (preferably a full-bodied candle) would, in our opinion, be enough to consider selling this pair, targeting the top edge of the weekly demand at 1.3115. Regarding longs, we would advise treading carefully given the higher-timeframe picture right now.

Data points to consider: US durable goods orders at 1.30pm GMT+1.

Levels to watch/live orders:

• Buys: Flat (Stop loss: N/A).
• Sells: Watch for H4 price to engulf 1.32 and then look to trade any retest seen thereafter ([waiting for a reasonably sized H4 bear candle – preferably a full-bodied candle – to form following the retest is advised] stop loss: ideally beyond the candle's wick).

USD/CHF:  

Weekly gain/loss: – 46 pips

Weekly closing price: 0.9691

Although weekly price remains buoyed above the weekly Quasimodo support level at 0.9639, the bears made an appearance last week, and thus could force the unit back down to the said weekly Quasimodo.

The view from the daily timeframe shows price trading between the aforementioned weekly Quasimodo support level and a daily supply base coming in at 0.9825-0.9786. Of particular interest here is the daily supply has managed to hold price lower once already on the 30th May, so it is certainly not a zone one should overlook, even though weekly price is trading nearby a support!

Looking at Friday's movement on the H4 chart, the 0.97 handle was challenged and eventually consumed during the later hours of the US segment. Fortunately for the bulls, however, June's opening level at 0.9680 held steady and produced a small end-of-day correction going into the closing bell. Bolstering this monthly level we have the following structures:

A H4 channel support line taken from the low 0.9613.

A H4 AB=CD (black arrows) 127.2% ext. at 0.9675 drawn from the high 0.9770.

A 61.8% Fib support at 0.9692 taken from the low 0.9640.

Our suggestions: Entering into a long position at current price is tempting. Be that as it may, there are two cautionary points to consider:

By entering into a long position, you will effectively be buying into the 0.97 handle.

While H4 confluence is strong at current price, the higher-timeframe structures show little support.

Our team will not be looking to trade long from current price UNTILL we have witnessed a decisive close above the 0.97 handle. Our impression is that a move above 0.97 will show buyer intent, and at least drag the H4 candles back up to the H4 sell zone we talked about last week at 0.9774/0.9750. Ideally though, we'd be eyeing the H4 supply above here at 0.9825-0.9801 as a final take-profit area should we manage to secure a long position, as it sits within the upper edge of the daily supply mentioned above.

Data points to consider: US durable goods orders at 1.30pm GMT+1.

Levels to watch/live orders:

• Buys: Watch for H4 price to engulf 0.97 and then look to trade any retest seen thereafter ([waiting for a reasonably sized H4 bull candle to form – preferably a full-bodied candle – following the retest is advised] stop loss: ideally beyond the candle's tail).
• Sells: Flat (stop loss: N/A).

DOW 30

Weekly gain/loss: + 9 points

Weekly closing price: 21386

Despite the index closing higher for a fifth consecutive week, the unit printed a rather aggressive weekly selling wick. Given the strength of the underlying trend at this time, selling on the basis of this candle formation may not be the best path to take. Let's bump down to the lower timeframes and see what else we can find.

On the daily timeframe, Friday's action chalked up a reasonably clear indecision candle. The next downside target from here can be seen at a demand zone drawn from 21192-21254.

Looking over to the H4 candles, the demand base at 21306-21363, as expected, held firm. For those who follow our analysis on a regular basis, you may recall that our desk is currently long from 21164. 50% of that position was quickly liquidated at 21234, with the remaining 50% left in the market to run since we intend on trailing this trend long term. The stop-loss order is currently positioned below the said H4 demand at 21298, as we believe this to be the safest area for the time being. Ultimately, we want this zone to continue holding firm and eventually punch to fresh record highs.

Our suggestions: Should H4 price remain afloat above the current demand, and print a full or near-full-bodied bullish candle, our desk has noted that they would consider adding to the current position and trailing accordingly.

Data points to consider: US durable goods orders at 1.30pm GMT+1.

Levels to watch/live orders:

• Buys: 21164 ([live] stop loss: 21298). 21306-21363 ([waiting for a reasonably sized H4 bull candle – preferably a full-bodied candle – to form before pulling the trigger is advised] stop loss: ideally beyond the candle's tail).
• Sells: Flat (stop loss: N/A).

GOLD

Weekly gain/loss: + $2.7

Weekly closing price: 1256.4

Following two weeks of dominant selling, the metal recovered last week and formed a nice-looking weekly buying tail. From the weekly timeframe alone, this, for us, would not be considered a buy signal. The reason being simply comes down to where the candle formation took shape: mid-range between an area comprised of two weekly Fibonacci extensions 161.8/127.2% at 1313.7/1285.2 taken from the low 1188.1 (green zone) and a weekly demand at 1194.8-1229.1.

From the daily scale, bullion is seen trading within the upper boundary of a resistance area coming in at 1247.7-1258.8. With that being said, there has been little bearish intent shown from here as of yet. Should the bears perk up then the next area on the radar for our team would be the channel support extended from the low 1180.4 (intersects with the said weekly demand).

In Friday's report, we noted that the metal shows a possible H4 AB=CD bearish correction at hand. As you can see, the bounce from April's opening level at 1248.0 extended north on Friday and shook hands with the AB=CD ext. point at 1258.3.

Not only was the AB=CD completion interesting, we also highlighted the nearby merging H4 resistance at 1259.1, two H4 trendline resistances taken from lows of 1245.9/1252.9 and a H4 50.0% retracement value at 1261.0. In addition to this, we mentioned that the H4 resistance level at 1259.1 is planted just above a daily resistance area pegged at 1247.7-1258.8.

Our suggestions: As can be seen from the H4 chart, the unit has already responded to the H4 sell zone marked in green at 1261.0/1258.3, but printed an indecision candle, which is not something we were willing to sell.

Should price retest the sell zone sometime today, and form a reasonably sized H4 bear candle (preferably a full-bodied candle), we would look to short and target April's opening level first and foremost. Waiting for additional candle confirmation will help avoid an unnecessary loss and also help sidestep any fakeout that may be seen given that the said H4 sell zone is relatively small.

Levels to watch/live orders:

• Buys: Flat (stop loss: N/A).
• Sells: 1259.1 region ([waiting for a reasonably sized H4 bear candle – preferably a full-bodied candle – to form before pulling the trigger is advised] stop loss: ideally beyond the candle's wick).

Global Markets:

• Asian stock markets: Nikkei up 0.05 %, Shanghai Composite rose 0.50 %, Hang Seng rallied 0.40 %, ASX 200 gained 0.10 %
• Commodities: Gold at $1256 (+0.05 %), Silver at $16.66 (+0.10 %), WTI Oil at $43.50 (+1.10 %), Brent Oil at $46.25 (+1.05 %)
• Rates: US 10-year yield at 2.16, UK 10-year yield at 1.04, German 10-year yield at 0.26

News & Data

• Japan Corporate Services Price Index 0.7 % vs 0.7 % expected
• Asia stocks edge up on optimism over global growth, oil rebounds – RTRS
• Oil climbs on weaker dollar, but rise in U.S. drilling drags – RTRS

CFTC Positioning Data:

• EUR long 45K vs 79K long last week
• GBP short 38K vs 39K short last week
• JPY short 50K vs 51K short last week
• CHF short 3K vs 14K short last week
• CAD short 82K vs 88K short
• AUD long 15k vs short 1K last week
• NZD long 21K vs 1K short last week

Markets Update:

Markets had a quiet start into the new trading week, amid a lack of data and events overnight. EUR/USD opened around 1.12 and fell to 1.1185, while GBP/USD consolidated in a 1.2730-50 range. USD/JPY traded in a 111.15-35 range, while AUD/USD rose from 0.7560 to 0.7580.

Asian stock indices are mostly up on the day, led by the Shanghai Composite. Oil prices rallied overnight, which could support equities, if it can sustain momentum. Heavy resistance is seen ahead of $44 in WTI and around $46.50 in Brent.

Volatility should increase again this week, with a fair number of data releases to look forward too. Today, the main event will be the German IFO numbers, an indicator for business climate and business outlook.

Upcoming Events:

• 09:00 BST – German IFO Business Climate
• 13:30 BST – US Durable Goods Orders
• 23:45 BST – New Zealand Trade Balance

The Week Ahead:

Tuesday, June 27th

• 07:45 BST – French CPI
• 15:00 BST – US CB Consumer Confidence
• 15:00 BST – US Richmond Manufacturing Index

Wednesday, June 28th

• 07:45 BST – French Consumer Confidence
• 10:00 BST – Italian CPI
• 15:00 BST – US Pending Home Sales
• 15:30 BST – US Crude Oil Inventories

Thursday, June 29th

• 00:50 BST – Japan Retail Sales
• 02:00 BST – Australia HIA New Home Sales
• 02:00 BST – New Zealand ANZ Business Confidence
• 10:00 BST – Euro Zone Consumer Confidence
• 13:00 BST – German CPI
• 13:30 BST – US GDP
• 13:30 BST – US Initial Jobless Claims
• 23:45 BST – New Zealand Building Consents

Friday, June 30st

• 00:30 BST – Japan CPI
• 00:30 BST – Japan Household Spending
• 00:30 BST – Japan Unemployment Rate
• 00:50 BST – Japan Industrial Production
• 02:00 BST – China Manufacturing PMI
• 02:00 BST – China Non-Manufacturing PMI
• 02:30 BST – Australia Private Sector Credit
• 06:00 BST – Japan Housing Starts
• 07:00 BST – German Retail Sales
• 08:55 BST – German Unemployment Rate
• 09:30 BST – UK GDP
• 10:00 BST – Euro Zone CPI
• 13:30 BST – Canadian GDP
• 13:30 BST – US Personal Income
• 13:30 BST – US Personal Spending
• 14:45 BST – US Chicago PMI
• 15:00 BST – US Michigan Consumer Sentiment

EURUSD - With the pair seeing rejecting lower prices to close higher the past week, further bullishness is likely. Resistance comes in at 1.1200 level with a cut through here opening the door for more upside towards the 1.1250 level. Further up, resistance lies at the 1.1300 level where a break will expose the 1.1350 level. Its weekly RSI is bullish and pointing higher suggesting more strength. Conversely, support lies at the 1.1100 level where a violation will aim at the 1.1050 level. A break of here will aim at the 1.1000 level. All in all, EURUSD faces further upside threats on price rejection.

EUR/USD stayed in consolidation below 1.1295 last week and outlook is unchanged. Initial bias remains neutral this week first. With 1.1109 support intact, there is no indication of reversal yet. Decisive break of 1.1298 key resistance will carry larger bullish implication and target 1.1615 resistance next. On the downside, break of 1.1109 support will indicate short term topping and rejection from 1.1298. In such case, intraday bias will be turned to the downside for 1.0838 support.

In the bigger picture, the case for medium term reversal continues to build up with EUR/USD staying far above 55 week EMA (now at 1.0941). Also, bullish convergence condition is seen in weekly MACD. Focus will now be on 1.1298 key resistance. Rejection from there will maintain medium term bearishness and would extend the whole down trend from 1.6039 (2008 high). However, firm break of 1.1298 will indicate reversal. In such case, further rally would be seen back to 1.2042 support turned resistance next.

In the long term picture, the case for completion of down trend from 1.6039 (2008 high), and long term bottoming at 1.0339, is starting to build up. Decisive break of 1.1298 will bring rise back to 1.2042 as first resistance. And in that case, we should at least see rally back to 38.2% retracement of 1.6039 to 1.0339 at 1.2516.

USD/JPY edged higher to 111.78 last week but turned sideway since then. Initial bias stays neutral this week first. Further rise is mildly in favor with 110.63 minor support intact. Above 111.78 will target channel resistance (now at 112.87). Sustained break there will suggest that whole pull back from 118.65 has completed at 108.12 already. In such case, further rise should be seen to 114.36 resistance for confirmation. However, break of 110.63 will turn bias back to the downside for 108.81 instead.

In the bigger picture, price actions from 125.85 high are seen as a corrective pattern. It's uncertain whether it's completed yet. But in case of another fall, downside should be contained by 61.8% retracement of 75.56 to 125.85 at 94.77 to bring rebound. Overall, rise from 75.56 is still expected to resume later after the correction from 125.85 completes.

In the long term picture, the rise from 75.56 long term bottom to 125.85 medium term top is viewed as an impulsive move. Price actions from 125.85 are seen as a corrective move which could still extend. But, up trend from 75.56 is expected to resume at a later stage for above 135.20/147.68 resistance zone.

GBP/USD dropped to 1.2588 last week and breached 1.2614 key support level but recovered. Upside of rebound was limited below 1.2813 resistance and outlook is unchanged. Initial bias remains neutral this week first. At this point, we still favor the case that consolidation pattern from 1.1946 has completed at 1.3047 already. Sustained break of 1.2614 should confirm our bearish view and target a test on 1.1946 low next. However, break of 1.2813 resistance will dampen our view and turn bias back to the upside for 1.3047 and above.

In the bigger picture, fall from 1.7190 is seen as part of the down trend from 2.1161. Price actions from 1.1946 medium term low are seen as a consolidation pattern, which could have completed at 1.3047 after hitting 55 week EMA. Break of 1.1946 low will target 61.8% projection of 1.5016 to 1.1946 from 1.3047 at 1.1150 next. In case the consolidation from 1.1946 extends, outlook will stay remain bearish as long as 1.3444 resistance holds.

In the longer term picture, no change in the view that down trend from 2.1161 is still in progress. On resumption, such decline would extend deeper to 100% projection of 2.1161 to 1.3503 from 1.7190 at 0.9532.

USD/CHF stays in corrective price actions above 0.9613 last week and outlook is unchanged. Initial bias remains neutral this week first. As long as 0.9807 resistance holds, further fall is expected. Break of 0.9613 will resume the decline from 1.0342 and target 0.9548 support and below. We'd start to look for bottoming signal again as it approaches 0.9443 key support level. On the upside, firm break of 0.9807 will indicate near term reversal and turn outlook bullish for 1.0099 resistance next.

In the bigger picture, USD/CHF is still bounded in medium term range of 0.9443/1.0342 for the moment. Consolidative trading would likely continue and medium term outlook remains neutral. Break of 1.0342 key resistance is needed to confirm underlying bullish momentum in the pair. Meanwhile, downside attempts should be contained by 0.9443 key support level. However, sustained break of 0.9443 will carry larger bearish implication and target 0.9 handle.

AUD/USD turned into consolidation below 0.7635 last week. Initial bias remains neutral this week first. As long as 0.7523 minor support holds, further rise is in favor. Break of 0.7635 will extend the rise from 0.7328 to 0.7748 resistance and above. At this point, there is no clear sign of range breakout yet. Hence, we'd be cautious on topping again as it approaches medium term fibonacci level at 0.7849. Meanwhile, break of 0.7523 will argue that rebound from 0.7328 is completed. In that case, intraday bias will be turned back to the downside for 0.7370 support.

In the bigger picture, we're still treating price actions from 0.6826 low as a corrective pattern. And, as long as 38.2% retracement of 0.9504 to 0.6826 at 0.7849 holds, long term down trend from 1.1079 is expected to resume sooner or later. Break of 0.6826 low will target 0.6008 key support level. However, firm break of 0.7849 will indicate that rise from 0.6826 is developing into a medium term rebound, rather than a sideway pattern. In such case, stronger rise should be seen to 55 month EMA (now at 0.8096) and above.

In the longer term picture, while the down trend from 1.1079 might extend lower, we're not anticipating a break of 0.6008 (2008 low) yet. We'll look for bottoming above there to reverse the medium term trend.

USD/CAD stayed in consolidation above 1.3164 last week and outlook is unchanged. Initial bias remains neutral this week first. Upside of recovery should be limited by 1.3387 support turned resistance to bring fall resumption. As noted before, corrective rise from 1.2460 has completed at 1.3793 already. Below 1.3164 will extend the decline from 1.3793 to 1.2968 cluster support, 61.8% retracement of 1.2460 to 1.3793 at 1.2969. However, firm break of 1.3387 will dampen our view and turn focus back to 1.3537 resistance next.

In the bigger picture, price actions from 1.4689 medium term top are seen as a correction pattern. The first leg has completed at 1.2460. Rise from 1.2460 is seen as the second leg and has completed at 1.3793, ahead of 61.8% retracement of 1.4689 to 1.2460 at 1.3838. Break of 1.3222 should now indicate the start of the third leg while further break of 1.2968 should confirm. In that case, USD/CAD should decline through 1.2460 support to 50% retracement of 0.9406 to 1.4869 at 1.2048.

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.

GBP/JPY's recovery last week was limited below 142.75 minor resistance and there is no confirmation of completion of fall from 148.09 yet. Initial bias remains neutral this week first. On the downside, break of 138.65 will resume the decline from 148.09. In that case, we'd look for bottoming signal around 135.58, which is close to 135.39 fibonacci level, to bring rebound. On the upside, break of 142.75 should confirm completion of the fall from 148.09 and turn bias back to the upside for this resistance.

In the bigger picture, while the fall from 148.09 is deeper than expected, we're not bearish in the cross yet. Price action from 148.42 is possibly developing into a sideway pattern with fall from 148.09 as the third leg. Deeper decline could be seen but we're looking for strong support from 135.58 and 50% retracement of 122.36 to 148.42 at 135.39 to contain downside. Rise from 122.36 is still mildly in favor to resume at a later stage. However, sustained break of 135.58/39 will confirm reversal and target a retest on 122.36 low.

In the longer term picture, based on the impulsive structure of the decline from 195.86 to 122.36, such fall should not be completed yet. But we will now pay close attention to the structure of the rise from 122.36 to determine whether it's a corrective move, or an impulsive move. That would decide whether a break of 116.83 low would be seen.