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GBP/USD

GBP/USD had been in a massive wedge formation for 30 years, tightening relatively to [1.4395 – 2.0145]. The shallower than forecast corrective rally for January 2016 left the medium-term technical and momentum persistently bearish and resulted in the forecast decline to 1.4270 for February 2016. The very premature further decline shy of the 1.3655 long-term objective for October 2016 has produced slight medium-term divergences. We are now forecasting only a weak further corrective rally to 1.4565 in April to alleviate the divergences, then a gradual decline to the 1.3655 October 2016 objective, in a less bearish medium-term outlook into yearend 2016 [1.3655 – 1.5885]. Only a monthly close back above 1.5890 would completely neutralize the bearish long-term momentum and result in a weak retest of 1.6670 over the subsequent three months.

NOTE: EURGBP decline to the .7070 long-term objective complete; now volatile, broad consolidation into October 2016 [.7070 - .8050].

USD/JPY

As in the mid-year 2015 quarterly outlook highlighting the USD/JPY, the rally to the 124.15 top of the medium-term consolidation view and forecast correction to 115.55 in August 2015 left the medium-term and long-term technical outlooks eroding to neutral/bearish. Although we did not expect a deeper decline than 115.55 through the first quarter of 2016, the monthly close in February 2016 below 115.55 confirmed our view of the long-term top in USD/JPY at 124.65. We are forecasting a decline to 107.80 weak long-term support through May 2016 in the now bearish medium-term outlook [105.35 – 117.30] through October 2016. As a significant currency pair to the EUR/USD, we expect a high degree of volatility to ensue as the Dollar declines against the Yen and the Dollar appreciates against the Euro. As a result, we are focused on EUR/JPY, which has been testing the 125.35 critical monthly close for the last two months. We are forecasting a monthly close below 125.35 in May 2016, paving the way for the decline to 111.10 through September 2016, and facilitating the forecasts for these currencies against the Dollar. Only a monthly close back above 121.55 in USD/JPY would neutralize the bearish outlook and revert to a more neutral medium-term outlook [110.60 – 124.65] into November 2016.

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