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Yen Picking Up Strength as Markets Enter Second QuarterDollar ended last week broadly lower as positive job data failed to counter the negative impact from Fed Chair Janet Yellen's dovish talks. Nonetheless, overall developments in the financial markets were rather mixed. Stocks ended up high with DJIA closed at 17792.75 and S&P 500 at 2072.28. Both are on track for retesting records highs even though they started to lose moment. On the other hand, WTI crude oil looked like it finally topped out earlier at 41.90 with last week's fall to close at 36.79. Weakening oil price had no impact to stocks so far. Meanwhile, gold continued to struggle in range of 1200/90 as recent consolidation extended. In the currency markets, commodity currencies ended generally higher. However, it were the late strength of Yen that caught most attentions.
Dollar index took out 04.57 support last week to resume the choppy decline from 100.51. Near term outlook stays bearish as long as 96.40 resistance holds. We'd expect deeper fall towards 92.62 support. But still, such decline from 100.51 is viewed as the third leg of the consolidation pattern from 100.39. Hence, we'd expect strong support from 38.2% retracement of 78.90 to 100.39 at 92.18 to contain downside and bring rebound. This is in line with the development in EUR/USD which saw a break of 1.1376 resistance last week. And EUR/USD is possibly heading for a test on 1.1713 resistance before reversing the near term trend. Also, weakness in dollar could later be seen in USD/JPY with a break of 110.66 support too.
WTI crude oil's rebound from 26.05 could have finally completed at 41.90 after hitting 61.8% retracement of 50.92 to 26.05 at 41.42. The 35.96 support mentioned last week wasn't taken out yet. But this level will be in focus this week. Break there will likely send WTI back to retest 26.05 low. USD/CAD edged lower to 1.2856 last week but lost momentum ahead of 100% projection of 1.4689 to 1.3638 from 1.3858 at 1.2807. We're expecting strong support from 1.2807 to bring rebound. And break of 35.96 in WT would likely accelerate the selloff and send USD/CAD through 1.3295 resistance. Canadian dollar already underperformed Aussie and Kiwi last week. But reversal in Canadian dollar could drag down both.
GBP/JPY recovered to 162.56 last week but reversed well ahead of 164.09 resistance. Initial bias is neutral this week first. Outlook is unchanged that price actions from 154.70 are a corrective pattern. Below 158.42 support will indicate that it's completed at 164.09 and turn bias to the downside for retesting 154.70 low. On the upside, above 162.56 resistance would probably extend the rise from 154.70. But in that case, we'd expect strong resistance above 61.8% retracement of 175.01 to 154.70 at 167.25 to limit upside and bring down trend resumption.
In the bigger picture, a medium term top was formed at 195.86 on bearish divergence condition in weekly MACD. Fall from 195.86 is currently viewed as a correction and would likely extend to 61.8% retracement of 116.83 to 195.86 at 147.01 before completion. On the upside, break of 175.01 resistance is needed to indicate completion of fall from 195.86. Otherwise, outlook will remain bearish in case of rebound.
In the longer term picture, the up trend from 116.83 long term bottom should have made a medium term top at 195.86 already. We'd expect price actions from 195.86 to develop into a corrective pattern.
Dollar index took out 04.57 support last week to resume the choppy decline from 100.51. Near term outlook stays bearish as long as 96.40 resistance holds. We'd expect deeper fall towards 92.62 support. But still, such decline from 100.51 is viewed as the third leg of the consolidation pattern from 100.39. Hence, we'd expect strong support from 38.2% retracement of 78.90 to 100.39 at 92.18 to contain downside and bring rebound. This is in line with the development in EUR/USD which saw a break of 1.1376 resistance last week. And EUR/USD is possibly heading for a test on 1.1713 resistance before reversing the near term trend. Also, weakness in dollar could later be seen in USD/JPY with a break of 110.66 support too.
WTI crude oil's rebound from 26.05 could have finally completed at 41.90 after hitting 61.8% retracement of 50.92 to 26.05 at 41.42. The 35.96 support mentioned last week wasn't taken out yet. But this level will be in focus this week. Break there will likely send WTI back to retest 26.05 low. USD/CAD edged lower to 1.2856 last week but lost momentum ahead of 100% projection of 1.4689 to 1.3638 from 1.3858 at 1.2807. We're expecting strong support from 1.2807 to bring rebound. And break of 35.96 in WT would likely accelerate the selloff and send USD/CAD through 1.3295 resistance. Canadian dollar already underperformed Aussie and Kiwi last week. But reversal in Canadian dollar could drag down both.
GBP/JPY recovered to 162.56 last week but reversed well ahead of 164.09 resistance. Initial bias is neutral this week first. Outlook is unchanged that price actions from 154.70 are a corrective pattern. Below 158.42 support will indicate that it's completed at 164.09 and turn bias to the downside for retesting 154.70 low. On the upside, above 162.56 resistance would probably extend the rise from 154.70. But in that case, we'd expect strong resistance above 61.8% retracement of 175.01 to 154.70 at 167.25 to limit upside and bring down trend resumption.
In the bigger picture, a medium term top was formed at 195.86 on bearish divergence condition in weekly MACD. Fall from 195.86 is currently viewed as a correction and would likely extend to 61.8% retracement of 116.83 to 195.86 at 147.01 before completion. On the upside, break of 175.01 resistance is needed to indicate completion of fall from 195.86. Otherwise, outlook will remain bearish in case of rebound.
In the longer term picture, the up trend from 116.83 long term bottom should have made a medium term top at 195.86 already. We'd expect price actions from 195.86 to develop into a corrective pattern.