GPB/JPY And EUR/JPY Daily Outlook: May 17, 2012

Daily Pivots: (S1) 127.47; (P) 127.98; (R1) 128.31

GBP/JPY dips to 127.62 today and deeper decline is still expected to 127.10 support. Break will confirm resumption of whole fall from 133.48 and should target 61.8% retracement of 117.29 to 133.48 at 123.47. However, downside momentum is so far rather weak. A break of 129.39 will indicate that fall from 131.79 has finished and flip bias back to the upside for this resistance and above instead.

In the bigger picture, we're like to point out that GBP/JPY has been the relatively stronger yen cross. The choppy decline from 163.05 should either be a diagonal triangle or the second leg of a consolidation pattern from 118.81. In either case, 116.83 is a medium-term bottom and fall from 133.48 should be contained above this level. And, rise from 116.83 should eventually resume and pass through 140.02 resistance towards 163.05 key resistance level. We'll maintain this view unless the structure of the fall from 133.48 suggests otherwise.
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EUR/JPY Daily Outlook

Daily Pivots: (S1) 101.79; (P) 102.25; (R1) 102.60

EUR/JPY lost some downside momentum and turned sideway but recovery is so far weak. Initial bias remains mildly on the downside with 102.86 minor resistance intact and current fall is expected to continue. Sustained trading below 61.8% retracement of 97.03 to 111.43 at 102.53 will pave the way to retest 97.03 low. On the upside, above 102.86 will indicate temporary bottoming and bring stronger recovery to 4 hours 55 EMA (now at 103.38) and above. But strong resistance should be seen from 104.61 to limit upside and bring fall resumption.

In the bigger picture, current development suggests that EUR/JPY's down trend from 169.96 isn't completed yet and another low below 97.03 would be seen. But we're favoring the case that recent pattern from 139.21 is a falling wedge with bullish convergence condition in weekly MACD. Current fall from 111.43 should be the last leg in such pattern. And thus, the break of 97.03 support should be marginal and strong support is expected well above 88.96 to bring reversal eventually. Hence, while deeper decline could be seen, we'll look for bottoming signs as EUR/JPY breaks 97.03. Meanwhile, above 111.43 will revive the case that EUR/JPY has indeed bottomed and would turn outlook bullish.
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