The EURJPY is entering the fastest part of the decline since the top last July. This fits with our EURUSD and USDJPY analysis which calls for the USDJPY to accelerate lower soon and the EURUSD to form a significant top within the next few weeks.
For the last few months we had figured that a large triangle was unfolding in the EURJPY due to the many 3 wave movements since the July 2007 high. However, recent developments require that we our alter our outlook.
The weekly chart shows that the EURJPY has completed a 5 wave advance from October 2000 low. Wave 2 was a sharp zigzag correction (as 2nd waves often are) and wave 4 was a running triangle (which is rare). Wave 5 has extended and put in what is probably a multi-year top just shy of 170. After a 5 wave advance, price tends to correct to the area that is bounded by the former 4th wave. In this case, that is roughly the 125-140 zone (thick black lines).
The main reason that we have changed our outlook for the EURJPY is the near term price action. We view the drop from 167.64 as a series of 1st and 2nd waves (following a major truncated 5th wave). The most recent 2nd wave is picture perfect as wave c and a are equal. The implications are that the EURJPY is entering a 3rd of a 3rd wave decline; often the fastest part of the decline. This fits with our EURUSD and USDJPY analysis. That is, the USDJPY should accelerate lower soon and the EURUSD is nearing a significant top. Near term resistance is at 159.00/50. Look to enter short in this area against 161.40.