Daily Currency Outlook
ActionForex | May 25, 2012 07:28AM ET
Daily Pivots: (S1) 124.24; (P) 124.60; (R1) 125.06
GBP/JPY stabilized a bit after dipping to 124.17 but recovery is weak so far. Also, with 126.45 resistance intact, near term outlook remains bearish and further fall is still expected. Current decline from 133.48 is expected to continue to 61.8% retracement of 116.83 to 133.48 at 123.19 next. Sustained break there will target a test on 116.83/117.29 support zone next. On the upside, though, note that break of 126.45 resistance will indicate short term bottoming and stronger rebound should then be seen to 127.10 resistance and above.
In the bigger picture, the acceleration of the fall from 133.48 suggests that rebound from 116.83 is finished with three waves up to 133.48. Note that GBP/JPY is limited well below 140.02 resistance, is now back below 55 weeks EMA and has weekly MACD crossed below signal line. Overall picture now argues that choppy decline from 163.05 is not finished. Sustained break of above mentioned 123.19 fibo level will likely send GBP/JPY through 116.83 to extend the long term down trend towards 100 psychological level.
EUR/JPY Daily Outlook
Daily Pivots: (S1) 99.31; (P) 99.79; (R1) 100.22
With 120.11 resistance intact, near term outlook in EUR/JPY remains bearish for the moment. Current fall from 111.43 is expected to continue to retest 97.03 next. Though, break of 102.11 will indicator short term bottoming and should bring rebound back to 104.61 support turned resistance.
In the bigger picture, the down trend from 169.96 is still in progress and fall from 111.43 is likely resuming such down trend. Break of 97.03 will target 61.8% projection of 123.31 to 97.03 from 111.43 at 95.18 and below. Nonetheless, note again that we're favoring the case that pattern from 139.21 is a falling wedge with bullish convergence condition in weekly MACD. Fall from 111.43 should be the last leg in such pattern. Hence, we'll expect strong support below 95.18 to contain downside, form a major bottom and bring reversal. So, focus will be on reversal signal below 95.18.
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