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USD Still Bullish vs. JPY and EURUSD Poised to Break Lower


The US Dollar maintains an extremely bullish tone against many of the major global currencies on both the short-term outlook and also on an intermediate-term viewpoint into late 2016 (and potentially for early 2017).

In particular, the USDJPY extension rally on Friday reinforcing the bigger picture intermediate-term bullish outlook, leaving the USDJPY FX forecast for significantly higher levels into year-end (see below).

The ECB Meeting last week produced a spike higher for EURUSD, then a significant breakdown, reinforcing intermediate-term bearish pressures. Previous probes below the late 2015 low at 1.0520 now setup risk for a challenge to the multi year low from March 2015 at 1.0459. The growing risk is for a breakdown through this level into December, which would place EURUSD at its lowest point since 2002 and open the door for a move closer to parity (1.0000), potentially before the end of this year.

USDJPY

Once again another push higher Friday, after a week of resilient consolidation above notable support now established at 112.83, to push through resistances at 114.41, 114.77/83/88 and psychological/ option level at 115.00, to set the risks higher again Monday.

For Monday:

  • We see an upside bias for 115.59; break here aims for 116.00 and maybe 116.45.
  • But below 114.59 opens risk down to 114.25 and 113.89, which we would look to try to hold.

Furthermore, we still see intermediate-term upside pressures intact from the recent push above the 50% retracement of the entire 2015-16 sell-off at 112.42.

Short/ Intermediate-term Outlook – Upside Risks:

  • We see a positive tone with the bullish threat to 115.59.
  • Above here targets 117.53 maybe as high as 120.00/10.

What Changes This? Below 108.51 signals a neutral tone, only shifting negative below 105.99.

Daily USDJPY Chart

usdjpy chart

EURUSD

Another push lower Friday through supports at 1.0587 and 1.0553, reinforcing the aggressive Thursday bearish outside pattern and bullish failure (back from 1.0874), to leave risks lower Monday.

Furthermore, the recovery failure reinforces the November and December probes below 1.0520 have reinforced the aggressive sell-off through 1.0987 after the US Presidential election result, maintaining the intermediate-term bearish theme.

For Monday:

  • We see a downside bias for 1.0529, the multi-month low at 1.0503 and psychological 1.0500; break here aims for the critical multi-year low at 1.0459 and maybe 1.0405.
  • But above 1.0630/31 aims for 1.0679 and opens risk up to and through 1.0720/30 back towards 1.0805.

Short/ Intermediate-term Outlook – Downside Risks:

  • We see a negative tone with the bearish threat to 1.0503, 1.0459 and maybe parity (1.0000).

What Changes This? Above 1.1300 signals a neutral tone, only shifting positive above 1.1366.

Monthly EURUSD Chart

eurusd chart

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