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The set of lower than expected consumer inflation data from the US was music of joy for investors. Stocks surged while treasury yield tumbled, on expectation that Fed is ready to start slowing down tightening pace in December. Risk-on sentiment was broad-based with NASDAQ starting to realign with DOW, despite crypto rout.

Dollar suffered steep, broad-based selloff as medium term correction is confirmed. While deeper decline is expected, it's too early to call for reversal. Selling could start to slow in the coming weeks. Yen surged most against others, with help from falling yields and lesser divergence between BoJ and Fed.

Meanwhile, European majors are the next winners, with Swiss Franc outperforming Euro and Sterling. Surprisingly, commodity currencies were just mixed, considering the strong rise in China and Hong Kong markets too. Still, Australian Dollar appeared to be the stronger one, comparing to Kiwi and Loonie.

Markets see 80% chance of 50bps Fed hike in Dec

Weaker than expected CPI data from the US gave risk sentiment a strong boost. Traders were also quick to reprice Fed's policy path. Now, there is more than 80% chance of a 50bps hike at December 14 meeting to 4.25-4.50%.

Regarding February meeting, markets are pricing in over 53% chance of a 25bps hike to 4.50-4.75%.

DOW surged, NASDAQ finally re-aligning

DOW had another strong rally last week and the break of the trend line resistance affirms the case that whole corrective fall from 36952.65 has completed with three waves down to 28600.94. It's still early to determine if rise from 28600.94 is the second leg of a long term consolidation pattern, or the start of an up trend. But in either case, further rally is expected as long as 31727.05 support holds. Break of 34281.36 resistance will pave the way to retest 36952.56 high.

A more important development was, perhaps, that NADAQ also broke through 11230.44 resistance to resume the rebound from 10088.82. The break above 55 day EMA also affirms near term bullishness, at least. Further rise is now in favor to trend line resistance at 12220. Firm break there will re-align the outlook with DOW. That is, whole correction from 16212.22 has completed and further rise would be seen to 13181.08 resistance next.

10-yield yield dived but 3.64 should be the floor

10-year yield dropped sharply to close at 3.813, as correction from 4.333 extended with a third leg. For now, TNX is seen as in correction to the rise from 2.525 only. Strong support is expected around 38.2% retracement of 2.525 to 4.333 at 3.642 to bring rebound, to extend the corrective pattern. Such development will keep the downside in USD/JPY, and other Yen crosses somewhat floored, to keep then in consolidations.

However, in the unlikely case that TNX breaks through 3.483 resistance turned support decisively, that could be a signal that it's in correction to a larger up trend. That could be accompanied by steep medium term decline in Yen pairs in general.

Dollar in medium term correction, but 103/105 should contain downside

Dollar index dived last week on the back on Fed expectations, falling yields, and rising stocks. The development indicates that it's already in correction to whole up trend from 89.20. Deeper decline is expected as long as 109.53 support turned resistance holds. Next target is cluster support zone at 104.63/105.00 (38.2% retracement of 89.20 to 114.77 at 105.00).

Such cluster support at 104.63/105.00 could be breached. But DXY will then face another zone between 102.99, 103.82, as well as 55 week EMA (now at 103.80). Hence, downside potential below 104.63 should be very limited, and a bottom should be formed anywhere between 103/105 to bring rebound.

But of course, sustained break of 102.99 will argue that something more substantial is happening and would open up deeper fall back to 55 month EMA at 97.02, which is rather unlikely from current perspective.

Swiss Franc and Aussie have the potential to outperform

Among European majors, Swiss Franc has the potential to continue to outperform in the near term. GBP/CHF has already completed a head and should top pattern. Meanwhile EUR/CHF has also broken 0.9798 resistance turned support. The development in EUR/CHF indicate that rise from 0.9407 has completed at 0.9953, ahead of 0.9970 support turned resistance. It's now at least in correction to rise from 0.9407.

Further decline is expected now as long as 0.9818 support turned resistance holds. Sustained trading below 38.2% retracement of 0.8407 to 0.9953 will pave the way to 61.8% retracement a 0.9616, and possibly below.

At the same time, AUD/CAD's strong rally suggests that Aussie has the potential to outperform. 0.8596 is at least a short term bottoming, as supported by medium term channel. Further rally is expected as long as 0.8772 minor support holds, to 38.2% retracement of 0.9514 to 0.8596 at 0.8947. Decisive break there will raise the chance of larger reversal, and target 61.8% retracement at 0.9163, and possibly further to channel resistance at around 0.9260.

USD/JPY Weekly Outlook

USD/JPY's decline accelerated to as low as 138.76 last week. The development suggests that it's already in correction to whole up trend from 102.58. Initial bias stays on the downside this week for 161.8% projection of 151.93 to 145.53 from 146.78 at 136.42. On the upside, above 142.47 minor resistance will turn intraday bias neutral first. But risk will remain on the downside as long as 145.53 support turned resistance holds.

In the bigger picture, a medium term top should be formed at 151.93. Fall from there is correcting larger up trend from 102.58. It's too early to call for bearish trend reversal. But even as a corrective move, such decline should target 38.2% retracement of 102.58 to 151.93 at 133.07, or further to 55 week EMA (now at 130.73).

In the long term picture, rise from 102.58, as part of the up trend from 75.56 (2011 low) was put to a halt at 151.93, just ahead of 100% projection of 75.56 to 125.85 from 102.58 at 152.87. There is no clear sign of long term reversal yet. Such up trend is expected to resume at a later stage, as long as 125.85 resistance turned support holds.

EUR/USD's rise from 0.9534 resumed last week and surged to as high as 1.0363. Initial bias stays on the upside this week for 1.0609 fibonacci level next. On the downside, below 1.0221 minor support will turn intraday bias neutral and bring consolidations first, before staging another rally.

In the bigger picture, a medium term bottom was in place at 0.9534, on bullish convergence condition in daily MACD. Even as a corrective rise, rally from 0.9534 should target 38.2% retracement of 1.2348 (2021 high) to 0.9534 at 1.0609. Sustained trading above 55 week EMA (now at 1.0575) will raise the chance of trend reversal and target 61.8% retracement at 1.1273. This will now remain the favored case as long as 1.0092 resistance turned support holds.

In the long term picture, as long as 1.0635 support turned resistance holds (2020 low), long term down trend from 1.6039 (2008) could still extend through 0.9534 at a later stage. However, sustained break of 1.0635 will confirm bottoming and at least turn long term outlook neutral.

USD/JPY's decline accelerated to as low as 138.76 last week. The development suggests that it's already in correction to whole up trend from 102.58. Initial bias stays on the downside this week for 161.8% projection of 151.93 to 145.53 from 146.78 at 136.42. On the upside, above 142.47 minor resistance will turn intraday bias neutral first. But risk will remain on the downside as long as 145.53 support turned resistance holds.

In the bigger picture, a medium term top should be formed at 151.93. Fall from there is correcting larger up trend from 102.58. It's too early to call for bearish trend reversal. But even as a corrective move, such decline should target 38.2% retracement of 102.58 to 151.93 at 133.07, or further to 55 week EMA (now at 130.73).

In the long term picture, rise from 102.58, as part of the up trend from 75.56 (2011 low) was put to a halt at 151.93, just ahead of 100% projection of 75.56 to 125.85 from 102.58 at 152.87. There is no clear sign of long term reversal yet. Such up trend is expected to resume at a later stage, as long as 125.85 resistance turned support holds.

GBP/USD's rise from 1.0351 last week and the break of 1.1759 support turned resistance carries larger bullish implications. Initial bias remains on the upside this week. Firm break of 61.8% projection of 1.0351 to 1.1494 from 1.1145 at 1.1851 will pave the way to 100% projection at 1.2288. On the downside, below 1.1597 minor support will turn intraday bias neutral and bring consolidation first.

In the bigger picture, current development suggests that rise from 1.0351 is a medium term bottom. Rise from there is at least correcting whole down trend from 1.4248 (2021 high). Further rise is expected as long as 1.1145 support holds. Sustained break of 38.2% retracement of 1.4248 to 1.0351 at 1.1840 will pave the way to 61.8% retracement at 1.2759 and possibly above.

In the longer term picture, as long as 1.4248 resistance holds (2021 high), long term outlook will remain neutral at best. Down trend from 2.1161 (2007) could still resume for another low through 1.0351 at a later stage.

USD/CHF fell sharply last week after completing a double top and hit as low as 0.9363. The strong down trend momentum suggests that larger trend has reversed. Initial bias stays on the downside this week for 0.9369 support, and then 0.9287 fibonacci level. On the upside, break of 0.9544 minor resistance will turn intraday bias neutral first and bring consolidation, before staging another decline.

In the bigger picture, rise from 0.8756 (2021 low) has completed at 1.0146, well ahead of 1.0342 long term resistance (2016 high). Based on current downside momentum, fall form 1.0146 might be a medium term down trend itself. Break of 61.8% retracement of 0.8756 to 1.0146 at 0.9287 will pave the way to 0.8756. In any case, risk will stay on the downside as long as 55 day EMA (now at 0.9834) holds.

In the long term picture, long term sideway pattern from 1.0342 (2016 high) is extending and it's probably in another medium term down leg. Downside will likely be contained by 0.8756 support in case of deeper fall. Overall, range trading should continue until further development.

AUD/USD's rebound from 0.6169 resumed and accelerated higher last week. The break of 0.6680 support turned resistance carries larger bullish implication. Initial bias stays on the upside for 161.8% projection of 0.6169 to 0.6521 from 0.6271 at 0.6841. On the downside, below 0.6576 minor support will turn intraday bias neutral and bring consolidations, before staging another rally.

In the bigger picture, the break of 0.6680 support confirms medium term bottoming at 0.6169. It's too early to call for trend reversal. But even as a corrective move, rise from 0.6169 should target 38.2% retracement of 0.8006 to 0.6169 at 0.6871. Sustained trading above 55 week EMA (now at 6934) will raise the chance of the start of a bullish up trend. This week now remain the favored case as long as 0.6521 resistance turned support holds.

In the long term picture, the down trend from 0.8006 could still be seen as a corrective move, considering that it failed to break through 161.8% projection of 0.8006 to 0.7105 from 0.7660 at 0.6202 decisively. Strong rebound from current level will keep long term outlook neutral first. However, sustained break of 0.6202 will open up deep fall to retest 0.5506.

USD/CAD's correction from 1.3976 extended lower last week and further decline could be send. But strong support should be seen from 1.3207 cluster support (61.8% retracement of 1.2726 to 1.3976 at 1.3204) to bring rebound. Break of 1.3494 support turned resistance will turn bias back to the upside. However, sustained break of 1.3204/7 will carry larger bearish implication and target 1.2952 support next.

In the bigger picture, as long as 1.3222 cluster support (38.2% retracement of 1.2005 to 1.3976 at 1.3223) holds, larger up trend from 1.2005 (2021 low) is still expected to resume through 1.3976 high at a later stage. . However, firm break of 1.3222/3 will indicate that the trend might have reversed. Deeper fall would be seen to next cluster support at 1.2726 (61.8% retracement at 1.2758).

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 long as 1.2061 support holds, which is close to 50% retracement of 0.9406 to 1.4689 at 1.2048.

GBP/JPY's correction from 172.11 extended lower last week, but bias would stay neutral first. Strong rebound from current level, followed by break of 166.06 minor support will turn bias back to the upside for retesting 172.11 high. However, sustained trading below 38.2% retracement of 148.93 to 172.11 at 163.25 will bring deeper decline to 61.8% retracement at 157.78 and possibly below.

In the bigger picture, there is no clear sign of medium term topping yet. Up trend from 123.94 (2020 low) could still resume through 172.11 high at a later stage. However, firm break of 159.71 support will argue that it's already in correction to the up trend from 123.94, and deeper decline would be seen back towards 148.93 support.

In the longer term picture, as long as 55 month EMA (now at 151.88) holds, rise from 122.75 could still extend higher at a later stage. Next target is 195.86 (2015 high).

EUR/JPY's correction from 148.38 extended lower last week and it's now drawing support from 55 day EMA (now at 143.54). Strong rebound from current level, followed by break of 145.02 minor resistance will turn intraday bias back to the upside for retesting 148.38 high. However, sustained break of 38.2% retracement of 133.38 to 148.38 at 142.65 will bring deeper fall to 61.8% retracement at 139.11 and possibly below.

In the bigger picture, there is no clear sign of medium term topping yet. Up trend from 114.42 (2020 low) could still resume through1 48.38 to 149.76 (2014 high). However, break of 137.32 support argue that a medium term correction has already started to correct the whole up trend from 144.42.

In the long term picture, outlook will stay bullish as long as 134.11 resistance turned support holds (2021 high). Sustained break of 149.76 (2014 high) will open up further rally, as resumption of the rise from 94.11 (2012 low), towards 169.96 (2008 high).