| By Joel Kruger, DailyFX Technical Strategist
Talking Points
- Markets to likely tighten up ahead of key weekend event risk
- Technicals still show room for additional short-term currency strength
- Looking for opportunity to buy upside break in USD/JPY
As we inch closer to the major weekend event risk in the form of the Greek election, it is entirely possible that markets will start to tighten up and consolidate until after the election. Market participants are also waiting on the details of the latest Spanish bailout, and at the moment, there isn't a whole lot going on that would justify committing aggressively in either direction. Technically however, the charts are painting a different picture (in my opinion) and continue to favor room for additional currency strength before considering the possibility of bearish resumption.
This would suggest that despite any concern on the fundamental front right now, risk correlated assets still have room to run to the upside. While we retain a broader bearish outlook on the Euro, at this point, we defer to the charts and look for additional upside over the coming sessions into the 1.2800-1.3000 area before considering a fresh short position. Elsewhere, we are keeping a close eye on USD/JPY and will be looking to buy aggressively on a break back over key short-term resistance at 79.80. ECONOMIC CALENDAR
TECHNICAL OUTLOOK
The market is in the process of correcting from some violently oversold levels after breaking to yearly lows just under 1.2300. While our overall outlook remains grossly bearish, from here we still see room for short-term upside before a fresh lower top is sought out. Look for the latest positive weekly close to open the door for acceleration into the 1.2800-1.3000 area, where fresh offers are likely to re-emerge. Setbacks should be well supported ahead of 1.2400. USD/JPY:
 The latest setbacks have been rather intense, with the market collapsing through the 200-Day SMA before finally finding support by 77.65. We have since seen attempts at recovery and we contend that the market should continue to break higher, with sights ultimately set on a retest and break of the 2012 highs by 84.20 further up. However, at this point, we will need to see a break and close back above 80.00 to officially alleviate downside pressures and reaffirm bullish outlook. Daily studies are now correcting from oversold and from here risks seem tilted to the upside to allow for a necessary short-term corrective bounce after setbacks stalled just shy of the 2012 lows from January. Look for the latest daily close back above 1.5440 to strengthen short-term bullish outlook, with acceleration projected into the 1.5800 area where a fresh lower top will be sought out in favor of underlying bear trend resumption. Only a close back under 1.5400 delays. USD/CHF:  While we retain a broader bullish outlook for this pair, with the market seen establishing back above parity over the coming weeks, shorter-term risks are for more of a corrective pullback to allow for the market to establish a fresh higher low. As such, we see risks for weakness over the coming sessions towards the 0.9200-0.9300 area before the market looks to reassert its bullish momentum and broader uptrend. --- Written by Joel Kruger, DailyFX Technical Currency Strategist
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