Japanese Yen - Is the Breakout Real?

  • Euro at 100% Extension
  • Japanese Yen Breakout?
  • British Pound May Be in Wave 3 Down
  • Swiss Franc Look For a Pullback
  • Canadian Dollar Correction Underway
  • Australian Dollar a-b-c Correction Over?
  • New Zealand Dollar Chopping Lower

Commentary: The break under the 100 day SMA is significant as the EURUSD has traded north of this moving average for all of 2007 (since November 2006 actually). The EURUSD is at the 100% extension of 1.3552-1.3392/1.3552 at 1.3264 right now. As we wrote on Friday (1.3680 Top Confirmed With Break of 1.3364) “If the larger bearish bias is correct, then price should drop close to 1.3086 next week or the week thereafter. On the other hand, if 1.3264 holds and price rallies back to 1.3392, then the long term bearish outlook is most likely incorrect and we would switch to the alternate count which has an ending diagonal unfolding from 1.2482.” In other words we are waiting for a drop to 1.3086 and a pullback in a 4th wave before aligning with the bear trend.

Strategy: None

Commentary: It was wring to be bearish at 122.13 as price has blasted through this level. Price is just below resistance from the 100% extension of 120.76-121.81/121.47 at 122.52 - this point is just above the 61.8% retracement of 135.13-101.67 at 122.35. The 161.8% extension is at 123.17 and is potential resistance as well. Still, there is significant resistance near 128.00/70. The 78.6% of 135.13-101.67, the 100% extension of 108.98-122.17/115.14, and the 100% extension of 101.67-121.39/108.98 are between 127.97 and 128.70. This push could be a breakout on the way to the 128.00 figure but given the presence of the 61.8% retracement at 122.35, we prefer to wait for a clear 3 wave pullback (intraday) before getting bullish.
Strategy: None

Commentary: We wrote yesterday that “given the size of the correction from 1.9621, it is likely that 1.9954-1.9621 was the initial 5 waves down (larger wave 1). This places Cable in wave 2 higher, which should end between 1.9788 and 1.9827. 1.9788 is especially attractive because it is the 50% of 1.9954-1.9621 and the previous 4th wave is at 1.9791.” Price reversed at 1.9780 but it takes a break below 1.9621 in order to confirm that wave 3 is down is underway.
Strategy: Bearish on break of 1.9621

Commentary: The daily close above the trendline drawn off of the October 2006 and January 2007 highs instills confidence in the bullish bias and a measured objective is at the 100% of 1.1993-1.2329/1.2145 at 1.2481. As mentioned Friday, this line is also the neckline from a 13 month head and shoulders pattern. From an EW perspective, the rally from 1.2145 is the 3rd of a 3rd wave rally, which often produce the most powerful moves. A rally through the mentioned 1.2481 level gives scope to an a confluence of Fibonacci targets at 1.2687/89 (100% of 1.1877-1.2571/1.1993 and 161.8% of 1.1993-1.2329/1.2145). These are targets that should be reached within 2 to 4 weeks. Near term, risk of a pullback is high as it looks like a clean 5 waves is close to complete. Support should be strong near 1.2372
Strategy: Bullish now, against 1.2145, targeting 1.2500 and 1.2700 (add to position at 1.2372)

Commentary: The 4th wave correction of the 1.1825-1.0548 decline is underway. The projected end for wave 4 is 1.0849-1.1036. 1.0849 seems more likely since that level intersects with channel resistance in 11 trading days. Corrections often unfold in a-b-c form, so we are treating the 1.0548-1.0711 rally as wave a in an a-b-c correction. Wave b may be underway now and could push into the 1.0583-1.0610 area. We are bullish now, against 1.0548, targeting 1.0800.

Strategy: We are bullish now, against 1.0548, targeting 1.0800.

Commentary: We wrote yesterday that “a small c wave is expected to unfold from .8447 (or close to it). Measured objectives are at .8336 and .8267 (100% and 161.8% extensions of .8467-.8365/.8447). The longer term structure remains bullish though.” An a-b-c correction may have ended at .8359 though and we will turn bullish on a rally through .8447.
Strategy: Flat now, getting bullish above .8447, against .8359, targt TBD

Commentary: We are bearish from .7535 and targeting .7262, which is the 161.8% extension of .7637-.7465/.7540. The 100% extension is at .7368 and may also be support so keep risk tight if price falls below .7400.
Strategy: Bearish at .7535, against .7637, targeting .7262.