EUR/USD
EUR/USD's strong rally (close to 300 pts) this week started on Monday and never quite looked back. As mentioned during the week, breaking of the inner trend line has invalidated our immediate bearish view and has now put medium term falling trend line (from 1.2587 to 1.2322, now at 1.2220) back into focus. Next week will be a critical week from medium term perspective.

Firm break above resistance zone between 78.6% retracement of 1.2322 to 1.1825 at 1.2216 and medium term falling trend line will indicate that EUR/USD has completed a wide range head and shoulder bottom formation, with left shoulder at left shoulder at 1.1865, head at 1.1639 and right shoulder at 1.1825. Bullish convergence in daily MACD is also supporting this argument. In such case, medium term outlook will turn bullish.

Taking weekly chart into perspective, we have 55 weeks EMA now at 1.2170. and bullish convergence condition in weekly MACD and RSI too. Sustained trading above this EMA will endorse the above scenario too.

On the upside, there a a few interpretation on what could be unfolding. But in any case, on firm breaking of the above mentioned resistance zone, we'd expect further rally to above 100% projection of 1.1639 to 1.2322 from 1.1825 at 1.2508 and challenge 1.2587 resistance at least. But of course, it hasn't happened yet and we'll prefer to be conservative and wait till a firm break of the mentioned resistance zone of 1.2216/20 before confirming the bullishness.

On the downside, overbought condition might limit upside initially next week and turn EUR/USD consolidative with retreat towards 1.2091 resistance turned support. However, we will not re-consider the medium term bearish case until at least a firm break below cluster support of 1.2034 (with 50% retracement of 1.1859 to 1.2206 at 1.2033).

GBP/USD
Cable rebounded strongly last week, starting on Monday, and recovered most of the lost in the previous week. Breaking of the inner trend line on Thursday indicates the fall from 1.7935 has finished at 1.7230 already. However, whether the current rebound from 1.7230 represents a correction to the fall from 1.7935 or resumption of medium term rebound from 1.7047 remains unclear.

On the upside, initial focus will be on the medium term falling trend line from 1.8498 to 1.7935 (now at 1.7727). Break of this trend line will add much credence that the current rebound from 1.2730 is resumption of the medium term rebound from 1.7047. Key level will lie in cluster resistance of 1.7779/84 (78.6% retracement of 1.7935 to 1.7230 at 1.7784 and 61.8% projection of 1.7047 to 1.7935 firm 1.7230 at 1.7779). Also, 55 weeks EMA is in proximity at 1.7809 too. Firm break of this level will confirm medium term bullishness and bring further rally towards 100% projection of 1.7047 to 1.1.7935 from 1.72230 at 1.8118 at least and possibly further to retest 1.8498 resistance.

Even though bullish convergence condition in daily MACD as well as weekly MACD and RSI are endorsing the above mentioned bullish case, we'd prefer to be conservative and wait till firm break of the medium term fall trend line before turning more bullish.

On the downside, overbought condition might limit upside initially next week and turn GBP/USD consolidative with retreat towards 1.7498 resistance turned support. However, we will not re-consider the medium term bearish case until at least a firm break below cluster support of 1.7420 (with 50% retracement of 1.7230 to 1.7594 at 1.7412).

USD/CHF
USD/CHF's sharp fall last week has invalidated our immediate bullish view by breaking through the inner trend line as mentioned during the week. The decline from 1.3228 has now reached previous mentioned cluster support level at 1.2895 (50% retracement of 1.2556 to 1.3238 at 1.2897) but USD/CHF have yet to break firmly below. As discussed before, a firm break of 1.2895 with sustained trading below will complete a double top formation, with the tops at 1.3238 and 1.3228 which could bring deep fall towards medium term rising trend line (from 1.2339 to 1.2556, now at 1.2671).

From a medium term picture, it remains unclear whether the current fall is merely part of a consolidation pattern from 1.3238 or medium term reversal. But still, note that a firm break below the medium term rising trend line will complete a wide range head and shoulder top formation with left shoulder at 1.3084, head at 1.3283 and right shoulder at 1.3238. In such case, medium term outlook will turn bearish and at least a retest of 1.2556 low should follow and will likely push USD/CHF towards support zone between 1.2239 and 50% retracement of 1.1288 to 1.3283 at 1.2256.

Even though bearish divergence condition in daily MACD, as well as weekly MACD and RSI are both endorsing this medium term bearish case, we'd prefer to be conservative and wait until at least we see sustained trading below 1.2895 cluster support to turn more bearish.

On the upside, oversold condition might contain downside initially next week with risk of recovering towards 1.2988 resistance but we will not reconsider the medium term bullish case at least until a firm break above 1.3037 resistance.

USD/JPY
USD/JPY's sharp fall last week has invalidated our rally resumption view. Subsequent 350 pts fall has now put the long term rising trend line (from 104.02 to 108.75, now at 115.99) back into perspective. Sustained trading below this trend line will argue that a big top is already formed at 121.38 and subsequent price actions from there has already started a major correction to the whole up trend from 101.65. Such scenario will be further confirmed if we see a further break below 61.8% projection of 121.38 to 113.41 from 119.37 at 114.44. In such case, further decline to 113.41 low is inevitable with risk of further fall towards cluster support at 111.40/52 (50% retracement of 101.65 to 121.38 at 111.52 and 100% projection of 121.38 to 113.41 from 119.37 at 111.40)

On the upside, touching of cluster resistance of 117.06 (61.8% retracement of 117.88 to 115.67 at 117.03 and 38.2% retracement of 119.17 to 115.67 at 117.05) will indicate a low is formed. But as long as 117.88 resistance holds, based on current dollar's broad based weakness, risk of another fall remains. We'd be rather conservative and consider USD/JPY being supported by the long term rising trend line and look back into the medium term bullish case only when USD/JPY breaks above 117.88 resistance again.