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EUR/USD edged higher to 1.1094 last week but retreated again. Initial bias stays neutral this week first. Further rally is expected as long as 1.0908 support holds. Break of 1.1094 will resume larger up trend to 1.1273 fibonacci level. Break there will target 61.8% projection of 0.9534 to 1.1032 from 1.0515 at 1.1441 However, considering bearish divergence condition in 4H MACD, break of 1.0908 support will indicate short term topping and turn bias back to the downside.

In the bigger picture, rise from 0.9534 (2022 low) is in progress for 61.8% retracement of 1.2348 (2021 high) to 0.9534 at 1.1273. Sustained break there will solidify the case of bullish trend reversal and target 1.2348 resistance next (2021 high). This will now remain the favored case as long as 1.0515 support holds, even in case of deeper pull back.

In the long term picture, while it's still early to call for long term trend reversal at this point, the strong break of 1.0635 support turned resistance (2020 low) should at least turn outlook neutral. Focus is now on 55 M EMA (now at 1.1166). Rejection by this EMA will revive long term bearishness. However, sustained break above here will be an indication underlying bullishness and target 1.2348 resistance next.

USD/JPY's rise from 129.62 resumed last week and accelerated to as high as 136.55. Initial bias stays on the upside for 137.90 resistance. Firm break there will resume whole rebound from 127.20, and target 100% projection of 127.20 to 137.90 from 129.62 at 140.32. For now, further rally will remain in favor as long as 133.00 support holds, in case of retreat.

In the bigger picture, price actions from 151.93 high are currently seen as a corrective pattern to the long term up trend. The first leg should have completed at 127.20. Rebound from there is seen as the second leg. Sustained break of 31.8% retracement of 151.93 to 127.20 at 136.34 will bring stronger rebound to 61.8% retracement at 142.48. Meanwhile, break of 129.62 will argue that the third leg is starting through 127.20 low.

In the long term picture, price action from 151.93 is seen as developing into a corrective pattern to up trend from 75.56 (2011 low). While deeper decline cannot be ruled out, downside should be contained by 38.2% retracement of 75.56 to 151.93 at 122.75.

GBP/USD's up trend resumed by breaking through 1.2545 last week. Initial bias remains on the upside this week. Next target is 1.2759 fibonacci level first. Firm break there will target 61.8% projection of 1.0351 to 1.2445 from 1.1801 at 1.3095. For now, outlook will remain bullish as long as 1.2385 support holds, in case of retreat.

In the bigger picture, the rise from 1.0351 medium term term bottom (2022 low) is in progress for 61.8% retracement of 1.4248 (2021 high) to 1.0351 at 1.2759. Sustained break there will add to the case of long term bullish trend reversal. Further break of 61.8% projection of 1.0351 to 1.2445 from 1.1801 at 1.3095 could prompt upside acceleration to 100% projection at 1.3895. For now, this will remain the favored case as long as 1.1801 support holds, even in case of deep pull back.

In the long term picture, while the rise from 1.0351 (2022 low) has been strong, there is no clear indicate of long term trend reversal yet. As long as 1.4248 resistance holds (2021 high), long term outlook will remain neutral at best.

USD/CHF recovered after edging lower to 0.8850, but stays below 0.9001 resistance. Initial bias remains neutral this week first. On the upside, decisive break of 0.9001 resistance should confirm short term bottoming at 0.8850. Intraday bias will be back on the upside 55 D EMA (now at 0.9113). Sustained break there will be a strong sign of bullish reversal. On the downside, break of 0.8850 will resume larger fall from 1.0146, to 61.8% projection of 1.0146 to 0.9058 from 0.9439 at 0.8767, which is close to 0.8756 long term support. Strong support is expected there to bring rebound, at least on first attempt.

In the bigger picture, fall from 1.1046 (2022 high) is in progress for 0.8756 support (2021 low). But overall, this fall is still seen as a leg in the long term range pattern from 1.0342 (2016 high). So, downside should be contained by 0.8756 to bring reversal. Sustained break of 0.9058 support turned resistance will be the first sign of medium term bottoming. However, decisive break of 0.8756 will carry larger bearish implications.

In the long term picture, long term sideway pattern from 1.0342 (2016 high) is expected to continue between 0.8756/1.0342. However, sustained break of 0.8756 will open up deeper fall back towards 0.7065 (2011 low).

AUD/USD's decline and break of 0.6619 last week argues that corrective pattern from 0.6563 has completed at 0.6804. Further decline is in favor this week as long as 0.6664 resistance holds. Firm break of 0.6563 will resume larger decline from 0.7156, and bring deeper decline through 0.6546 fibonacci level to 61.8% projection of 0.7156 to 0.6563 from 0.6804 at 0.6438 next. On the upside, break 0.6664 minor resistance will turn bias to the upside to extend the consolidation pattern with another rising leg.

In the bigger picture, as long as 61.8% retracement of 0.6169 to 0.7156 at 0.6546 holds, the decline from 0.7156 is seen as a correction to rally from 0.6169 (2022 low) only. Another rise should still be seen through 0.7156 at a later stage. However, sustained break of 0.6546 will raise the chance of long term down trend resumption through 0.6169 low.

In the long term picture, initial rejection by 55 M EMA (now at 0.7145) retains long term bearishness. That is, down trend from 1.1079 (2011 high) could still resume through 0.5506 (2020 low) on resumption.

USD/CAD's rose to 1.3668 last week but retreated since then. Initial bias is turned neutral this week first. Further rally is in favor as long as 1.3521 minor support holds. Corrective pattern from 1.3976 could have completed with three waves to 1.3299. On the upside, above 1.3668 will target 1.3860/3976 resistance zone. However, firm break of 1.3521 will dampen this bullish view and bring deeper fall back towards 1.3299 support instead.

In the bigger picture, the up trend from 1.2005 (2021 low) is still in progress. Break of 1.3976 will confirm resumption and target 61.8% projection of 1.2401 to 1.3976 from 1.3261 at 1.4234. Firm break there will pave the way to long term resistance zone at 1.4667/89 (2016, 2020 highs). On the downside, sustained break of 55 W EMA (now at 1.3302) is needed to confirm medium term topping. Otherwise, outlook will remain bullish even in case of deep pull back.

In the longer term picture, price actions from 1.4689 (2016 high) are seen as a consolidation pattern only, which might have completed at 1.2005. That is, up trend from 0.9506 (2007 low) is expected to resume at a later stage. This will remain the favored case as 55 M EMA (now at 1.3012) holds.

The markets experienced surprisingly high volatility in the last week of April, with central bank expectations as the primary driver. Japanese Yen emerged as the worst performer following BoJ's dovish stance, leading bond traders to abandon hopes for any changes to yield curve control. Australian Dollar was the second-worst performer, as economists now lean towards another RBA hold at the next meeting. Swiss Franc and Canadian Dollar also closed lower. On the other hand, British Pound was the strongest performer, followed by the New Zealand Dollar. US Dollar and Euro were mixed, leaning more towards the firmer side.

Trading activity is expected to remain high this week, with Fed, ECB, and RBA rate decisions featuring prominently, along with several important economic data releases in the first week of May. Technically, stocks in the US and Europe appear set for an extended rally in the near term. Pound, and to a lesser the Euro, will likely maintain an advantage against commodity currencies. Meanwhile, last week's Yen selloff could be just the beginning of a significant downward move.

Kazuo Ueda's Inaugural BoJ Meeting Exceeds Dovish Expectations, Yen Bears and Stock Investors Rejoice

Kazuo Ueda's first meeting as BoJ Governor proved more dovish than anticipated, delighting stock investors and Yen bears. Yield curve control parameters remained unaltered, and new economic projections indicated that the CPI core will decline again after reaching 2% target in 2024.

Forward guidance was modified, removing the statement, "it also expects short- and long-term policy interest rates to remain at their present or lower levels." However, the pledge to "not hesitate to take additional easing measures if necessary" was retained.

BoJ will carry out a "broad-perspective review of monetary policy" over the next 12 to 18 months, disappointing those who anticipated immediate changes as early as at last week's meeting.

10-year JGB closed significantly lower at 0.389%, as traders abandoned hopes of a change in the 0.50% cap in the near future. Yield curve appears smooth, without any dips around the 10-year range.

Nikkei made notable progress in resuming its near-term rally, closing at 28856.43. Outlook will remain bullish as long as 28241.67 support holds. Key near-term resistance of 29,222.77 should be tested soon. Firm break there will pave the way back to 30795.77 high and increase the likelihood of larger uptrend resumption.

Following post-BoJ selloff, Yen finished as the week's worst performer. CHF/JPY has finally surpassed 151.43 resistance to resume its long-term uptrend. Near-term outlook will remain bullish as long as 149.06 support holds. Next target the 161.8% projection of 137.40 to 147.58 from 140.21 at 156.68. There is now a realistic chance of breaking the 158.45 (made in 1979/80) to reach a new all-time high.

Aussie Struggles as RBA Pause Expectations Grow; GBP/AUD on the Move

Australian Dollar was the second worst performer last week, on growing expectation that RBA would pause for the second time at the upcoming meeting on May 2, Tuesday. The shift in expectation came after release of Q1 CPI report, which showed a lower path of headline inflation as RBA projected, and a path for trimmed mean CPI inline with the forecast. Thus, RBA would now have more room to continue to wait and assess the impact of prior hikes. Indeed, the current 3.60% cash rate target is now seen by some as the terminal one for the current cycle.

Additionally, commodity prices also weighed on the Aussie, with Copper falling to new 2023 low last week. Iron ore prices also had the worst month since October, on concern of weaker-than-expected peak construction season in China.

GBP/AUD was one the the top movers last week, gaining more than 2.1%. Near term outlook will now stay bullish as long as 1.8393 support holds. Current rally from 1.5925 should extend through 1.9218 resistance to 100% projection of 1.5925 to 1.8272 from 1.7218 at 1.9565.

It's still too early to conclude for now. But current development raises the chance that long term consolidation pattern from 2.2382 (2015 high) has completed with three waves to 1.5925). Rise from 1.4378 (2013 low) might be ready to resume. A key hurdle to overcome is the resistance zone between trend line resistance (now at around 1.9923 level), and 2.0840. This is the level to watch in the second half of the year.

Sterling Outperforms on Rate Expectations; GBP/CHF in Focus

Taking about Sterling, it emerged as the best performer of the week, closing even above March highs against all but Euro and Swiss Franc. Interest rate expectations are driving Pound's gains as UK remains the only major economy grappling with stubbornly high double-digit inflation. Without clear signs of increasing disinflation momentum, BoE will have little choice but to continue tightening.

Meanwhile, the overall economy appears to have weathered inflation pressures, led by robust growth in the services sector. As reflected in FTSE developments, investors do not seem too nervous at the moment. The near-term pullback may have completed well ahead of 55 Day EMA, and another rise to retest the record high of 8047.06 could occur within the quarter.

Developments in GBP/CHF leading up to BoE meeting on May 11 and its aftermath are worth watching. Price actions from 1.1574 (2022 high) are clearly corrective in nature. 38.2% retracement of 1.0183 to 1.1574 at 1.1043 was defended well despite breakthrough attempts. A short-term bottom may have formed at 1.1024 with last week's rebound, and further rise back to 1.1412 resistance is now favored.

It may also be time for an upside breakout. Break of 1.1024 would be the first sign a resumption of the rally from 1.0183 (2022 spike low). Further break of 1.1574 would also decisively surpass 55 W EMA (now at 1.1469). Subsequent medium-term rise should then be seen to 61.8% projection of 1.0183 to 1.1574 from 1.1024 at 1.1884.

We'll see if BoE provides the needed push for GBP/CHF later in the month.

Fed Likely to Continue Tightening but May Pause After Next Hike

Turning over to the US, with core PCE price index remaining high at 4.6% yoy in March, Fed is expected to maintain its tightening stance by implementing another 25 bps hike on May 3rd, the coming Wednesday. However, as headline PCE slowed more quickly than expected to 4.2%, Fed should have more confidence in pausing the cycle after this hike. This expectation is further supported by weaker-than-anticipated Q1 GDP growth, registering a modest 1.1% annualized rate.

Fed fund futures are now pricing in 83.9% probability of a 25 bps hike to 5.00-5.25% on Wednesday, with a near 50% chance that the rate will remain unchanged after September, and a 79.9% chance of a cut in November. The pricings are now more "rational". Naturally, future developments will influence these projections, including Fed's new economic projections to be published in June.

US stocks rebounded significantly late in the week, with DOW closing on a strong note at 34098.16, above the near-term resistance at 34082.94. The strong support from the 55 D EMA also affirms near-term bullishness. Further rallies are anticipated to 34712.28 resistance and beyond. A key hurdle will be 61.8% projection of 28660.94 to 34712.28 from 31429.82 at 35169.54, which could be tested later in the quarter.

Dollar Index remained within tight range last week, showing no significant progress. The favored view is that fall from 105.88 is the second leg of the corrective pattern from 100.82, completed at 100.78. Break of 102.80 resistance would support this view, and bring stronger rally back to 105.88 resistance as the third leg of the pattern. However, a decisive break below 100.82 would dampen this outlook, resuming the overall downtrend from 114.77.

EUR/JPY Weekly Outlook

EUR/JPY's up trend continued last week, surged through 148.38, and closed above 149.76 long term resistance. Initial bias stays on the upside this week. Next target is 153.64 projection level. On the downside, below 148.61 minor support will turn intraday bias neutral and bring consolidations first, before staging another rally.

In the bigger picture, current development indicates that rise from 114.42 (2020 low) is in progress. Next target is 61.8% projection of 124.37 to 148.38 from 138.81 at 153.64. Sustained break there will pave the way to 100% projection at 162.82. For now, medium term outlook will remain bullish as long as 138.81 support holds, even in case of deep pull back.

In the long term picture, break of 149.76 (2014 high) argues that whole up trend form 94.11 (2012 low) is resuming. Sustained trading above 149.76 will pave the way to 100% projection of 94.11 to 149.76 from 109.03 at 164.68, which is close to 169.96 (2008 high).

GBP/JPY's rally from 155.33 continued last week and accelerated to as high as 171.15. Initial bias remains on the upside this week for retesting 172.11 high. Firm break there will resume larger up trend and target 100% projection of 148.93 to 172.11 from 155.33 at 178.51. On the downside, below 167.95 support will turn intraday bias neutral and bring consolidations first, before staging another rally.

In the bigger picture, based on current momentum, up trend from 123.94 (2020 low) is likely ready to resume. Next target is 161.8% projection of 122.75 (2016 low) to 156.59 (2018 high) from 123.94 at 178.69. This will now remain the favored case as long as 165.40 support holds, in case of retreat.

In the longer term picture, as long as 55 M EMA (now at 153.82) holds, rise from 122.75 (2016 low) could still extend higher at a later stage to 195.86 (2015 high).

EUR/JPY's up trend continued last week, surged through 148.38, and closed above 149.76 long term resistance. Initial bias stays on the upside this week. Next target is 153.64 projection level. On the downside, below 148.61 minor support will turn intraday bias neutral and bring consolidations first, before staging another rally.

In the bigger picture, current development indicates that rise from 114.42 (2020 low) is in progress. Next target is 61.8% projection of 124.37 to 148.38 from 138.81 at 153.64. Sustained break there will pave the way to 100% projection at 162.82. For now, medium term outlook will remain bullish as long as 138.81 support holds, even in case of deep pull back.

In the long term picture, break of 149.76 (2014 high) argues that whole up trend form 94.11 (2012 low) is resuming. Sustained trading above 149.76 will pave the way to 100% projection of 94.11 to 149.76 from 109.03 at 164.68, which is close to 169.96 (2008 high).

EUR/GBP reversed after hitting 0.8874 and fell sharply since then. Initial bias is now mildly on the downside this week for retesting 0.8717 support. Decisive break there will resume whole choppy decline from 0.8977. On the upside, break of 0.8874 will resume the rebound from 0.8717 instead.

In the bigger picture, outlook remains rather mixed for now, except that price actions from 0.9267 (2022 high) are part of the long term range pattern from 0.9499 (2020 high). With 0.8720 support intact, rise from 0.8545 is in favor to continue through 0.8977. However, firm break of 0.8720 will argue that such rebound has completed, and open up deeper fall through this support level.

In the long term picture, long term range pattern is extending. But rise from 0.6935 (2015 low) is expected to extend at a later stage, to 0.9799 (2009 high).