- EURUSD: the overall outlook remains slightly bullish, but downside pressure emerged this week prior to Friday’s close.
- USDJPY: has made a reversal ahead of trend line support from February 2013, but is heading to some key resistance levels before the end of this week.
We published our most recent FX outlook into EURUSD and USD last Thursday (please see here for details). In today's edition, we look at these two key FX crosses ahead of this afternoon's heavy US economic data schedule.
EURUSD’s inability to close above the 1.3416 double bottom neckline confirmation has put a softer tone to this pair. The outlook still remains bullish on a daily chart, with the longer-term base chart pattern still intact at the 1.2745-55 zone. But the inability for EURUSD to close above 1.3416 has left the pair with a rather short-term neutral outlook. Teis is where we will focus on key intra-week levels to spark direction for the remainder of the week and possibly further out.
On the upside, short-term resistance is 1.3317 and a close above here would give scope for a test of the 1.3345-50 zone, which is the trend line resistance from 2011 May highs at 1.4940 and further out a retest of the 1.3416 level, which still remains key for a bullish outlook to be confirmed.
On the downside, for the remainder of the week, we look for 1.3232 to act as a short term support. A close below here would give scope for further downside acceleration for a test of 1.3187 and potentially the 1.3154 level, which is the 38 percent retracement in the 1.2754-1.3400 wave.
Chart 1: EURUSD outlook remains slightly bullish 
USDJPY continues to recover from its early August lows, but upcoming key resistance still remains intact. The cross remains in the triangle pattern from late May 2013, and together with the recent rebound ahead of the trend line support from February 2012, gives the short-term technical outlook a rather neutral stand. The daily stochastic has now turned higher to support an upside move, but for us to take a bullish stand, a close above the following three resistance levels would be needed. The first of these is 98.10 (trend line support from November 2012). The second is the 55-day moving average currently at 98.40 and the third is the cloud resistance which is now at 98.76.
A close above these levels would give scope for an accelerated upwards move for a test of the trend line resistance from the 2007 highs, currently in the 99.00-10 zone and further out, the psychologically important resistance level of 100.
On the downside, a break of trend line support from the February 2012 (now at 95.00-10) would be needed for the current technical outlook to change in favour of a stronger bearish bias.
Chart 2: USDJPY still looking to confirm a direction