The following are the weekly technical outlooks for EUR/USD, and USD/JPY as provided by TD Bank.
EURUSD peaked just under 1.39 in thin, late-December trading but failed to close above the 1.3800/10 area that had capped the market through the latter part of last year. The weakness in price action through the course of the past few days has taken EURUSD below short-term bull trend, moving average and initial retracement support. Weakness seems likely to extend to the low 1.35 area (61.8% retracement support for the November/December rally at 1.3524, 100-day MA at 1.3536) at least in the next few days. More broadly, the repeated failures in the 1.38 area suggest that a drop back to the 1.33 line is warranted. We are bearish and look for resistance in the low/mid 1.36 area to cap EUR rebounds in the week ahead.
The weekly chart underscores the potential importance of the December failure in the high 1.38 area—trend line resistance off the 2008 high. Weekly trend channel support at 1.3559 is liable to come under more pressure in the week ahead. The pattern of trade over the past year in EURUSD has been one of fading range extremes, as we have said many times before. The rejection of 1.38+ levels suggests that, beyond a test of the 1.33 zone in the next few weeks, a drop back to 1.27/1.28 may lie ahead.
USDJPY had seen nine consecutive weeks of net gains prior to the current one so a correction of some sort was perhaps due. Price action Thursday signaled a peak, confirmed by losses today, albeit with developments occurring in thin and illiquid trading (Japan remains closed). The risk of a deeper pullback cannot be excluded; the USD rally looks over extended and the market has not corrected the bare minimum of the 97/105 rally seen through late 2013. Trend channel support highlighted above is not especially strong but still seems to be enough to halt the USD slide for now, however. We think the longer-term trend remains positive, however, so we have to look for chances to buy—either on a dip nearer 101/102 or on an extension to new highs above 105.50.
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