GPB/JPY And EUR/JPY Daily Outlook: July 23, 2012

Daily Pivots: (S1) 122.13; (P) 122.96; (R1) 123.44

GBP/JPY drops sharply to as low as 121.48 so far today and the strong break of 122.03 minor support indicates that fall from 125.82 has resumed. Also, the development reaffirmed the case that a rebound from 118.82 is finished already. Intraday bias is back on the downside for retesting 118.82 first. On the upside, break of 123.79 resistance is needed to signal short term reversal. Otherwise, outlook will remain bearish even in case of recovery.

In the bigger picture, there was so far no impulsive upside move after GBP/JPY formed a medium-term bottom at 116.83. On the other hand, there was no sustainable selling neither. The development argues that even though there is no clear sign of trend reversal in GBP/JPY, it's more likely engaging in sideway consolidations, which corrects fall from 163.05. That is, we'd probably see more range trading between 116.83 and 140.02 (50% retracement of 163.05 to 116.83 at 139.94) ahead, before an eventual downside breakout.


EUR/JPY Daily Outlook

Daily Pivots: (S1) 94.96; (P) 95.83; (R1) 96.32

EUR/JPY dives further to as low as 94.49 so far today and intraday bias remains on the downside. Current fall should be target 61.8% projection of 111.43 to 95.64 from 101.62 at 91.86. Though, we'd be cautious on bottoming signal as it approaches 90 psychological level. On the upside, above 95.02 minor resistance will turn bias neutral and bring consolidations before staging another fall.

In the bigger picture, with 111.43 resistance intact, the down trend from 2008 high of 169.96 is still in progress and could extend further lower to 90 psychological level. However, as 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 above 88.96 to contain downside, form a major bottom and bring reversal. So, focus will be on reversal signal.