Daily Currency Outlook, May 21, 2012: GPB/JPY And EUR/JPY

Daily Pivots: (S1) 124.50; (P) 125.07; (R1) 125.50;

A temporary low is in place at 124.64 and intraday bias is turned neutral for consolidations. but recovery should be limited by 127.10 support turned resistance and bring another fall. Below 124.64 will extend the decline from 133.48 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.

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.

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EUR/JPY Daily Outlook

Daily Pivots: (S1) 100.02; (P) 101.20; (R1) 101.85;

A temporary low is in place at 100.20 and EUR/JPY's recovery from there continues higher today. Intraday bias is turned neutral and stronger recovery could be seen back to 4 hours 55 EMA (now at 102.48). But upside should be limited well below 104.61 support turned resistance and bring fall resumption. Below 100.20 will extend the fall from 111.43 to retest 97.03 low next.

In the bigger picture, the down trend from 169.96 is still in progress and fall from 111.43 is like 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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