GPB/JPY And EUR/JPY Outlook: May 15, 2012

Daily Pivots: (S1) 128.05; (P) 128.46; (R1) 128.88;

No change in GBP/JPY's outlook. Further decline is still expected with 129.57 resistance intact. Break of 127.10 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 129.57 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) 101.96; (P) 102.66; (R1) 103.10;

EUR/JPY recovers mildly as it's trying to draw support from 61.8% retracement of 97.03 to 111.43 at 102.53. But with 103.77 minor resistance intact, intraday bias remains on the downside for further decline. Sustained trading below 102.53 will pave the way to retest 97.03 low. On the upside, above 103.77 minor resistance will turn bias neutral and bring consolidation. But strong resistance should be seen inside 104.61/108.00 zone 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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