The euro against the US dollar
The EUR / US dollar pair resumed its correction from 1.2348 last week until it breached the 1.1834 level. This week’s initial bias remains to the downside for a 38.2% recovery from 1.0635 to 1.2348 at 1.1694 and possibly below. But we expect strong support from 1.1062 to contain the downside to complete the correction from 1.2348. Nevertheless, a break of the 1.1988 resistance is needed to indicate a short-term bottom. Otherwise, risk will remain on the downside even if it does recover.
The rally from 1.0635 is seen as the third leg of the pattern from 1.0339 (2017 low). Further upside can be seen to gather resistance at 1.2555 afterward (38.2% retracement from 1.6039 to 1.0339 at 1.2516). This situation will remain preferred as long as 1.1602 support holds. We will be alerted to the top mark around 1.2516 / 55. But a continued breach there will have long-term bullish implications.
The long-term bullish reversal situation continues to increase during this week, with bullish convergence in the monthly MACD indicator, and trading continues above the 55-month moving average and the long downtrend line. Focus is now on 1.2555 cluster resistance (38.2% retracement from 1.6039 to 1.0339 at 1.2516). A decisive break there would be confirmed and target the 61.8% retracement at 1.3862 and above.
The USD against the Japanese yen
The US dollar / JPY has resumed its course from the 102.58 level by taking out the 109.35 resistance last week. Initial bias remains to the upside this week for long-term channel resistance at 110.00. The decisive break there will have more enormous bullish ramifications and will target 111.71 resistance after that. On the downside, a break of 108.40 support is necessary to indicate a short-term top. Otherwise, the outlook will remain bullish in the event of a reversal.
The focus is now on long-term channel resistance (now at 110.00). A continued breakout there will indicate the completion of the downtrend from 118.65 (Dec 2016). Further break of the resistance 112.22 will confirm this bullish state and target 118.65 after that. Nevertheless, rejection of the resistance channel will keep the medium-term outlook bearish.
During this week, the rally from 75.56 (2011 low) in the long term to 125.85 (2015 high) is seen as an impulsive move. Price action from 125.85 is a corrective pattern that could still extend. In case of a deeper downturn, the downtrend should be contained by the 61.8% Fibonacci retracement ratio from 75.56 to 125.85 at 94.77. The upside from 75.56 is expected to resume at a later stage above the 135.20 / 147.68 resistance area.