We stated last week that “the count tells us that a 3rd of C is expected or possibly underway now. Remember, this point in wave structure is usually a vertical type of move. In other words, the EURJPY should fall off a cliff in the next few weeks. The target is not until below 149.25, but probably closer to 140.” The pair has declined but this should be just the beginning of a much larger drop. Near term resistance is at 162.50 and the EURJPY should remain below 163.87 to keep the most bearish count on track.
We maintain that the GBPJPY rally from 192.60 is a correction. For one, the first leg of the rally is in 3 waves. Second, the extended nature of the decline from 242.60 argues that the GBPJPY decline from 251.10 will unfold in 5 waves rather than 3. Since there are only 3 down as of right now, we can expect another low. Near term resistance begins at 205.39 and a bearish bias is warranted against 208.60.
The decline from 101.85 to 92.15 is only in 3 waves but is most likely wave A of a flat. In a flat, wave B often exceeds wave A in what is termed an expanding flat. We wrote last week that “the legs within wave B would be equal at 103.69, although a reversal could occur at any time.” The CHFJPY topped at 102.75 and has declined over 250 pips. As long as price is below 101.35, consider a top in place at 102.75. If 101.35 is breached, then it is likely that the pair will exceed 102.75 in order to complete a double zigzag from 95.12 closer to 103.69.
We maintain that the CADJPY is headed lower longer term (the series of lower lows and lower highs inspires confidence in the bearish assessment). The trendline drawn off of the 12/27/07, 2/26/08, and 4/18/08 highs has contained the pair so far and is defended by the 50%-61.8% of 109.62-95.68 at 102.65/104.29. Additional bearish technical evidence includes yesterday’s shooting star (bearish reversal pattern) just shy of the 61.8% Fibo (104.29).
We maintain that a major top is in place (likely a multi-year top at 107.84). We view the drop from 107.84 to 92.99 as wave 1 in a 5 wave bear cycle. Wave 2 takes the form of an expanded flat and is complete at 100.49. As long as price is below 100.49, the longer term bearish outlook is legitimate. The rally from 88.14 (a second wave itself) may have made a false break through the 78.6% of 100.49-88.14 / trendline drawn off of the 11/1/07 and 2/28/08 highs. False breaks often lead to violent reversals but 100.49 is the bearish ‘line in the sand’.
The choppy decline since the October high at 91.42 may be a series of 1st and 2nd waves. Under this count, the NZDJPY needs to remain below 88.11 for a C wave decline that will eventually come under 74.25 to remain on track. An alternate count treats the entire drop from 91.42 is an ending diagonal (similar to the EURJPY). Under this alternate, a wave 2 correction is underway towards fibo resistance in the 84/85.80 area. A rally through 88.11 would make this the preferred count. In both cases, lower prices are expected. The outcome would be delayed under the alternate count.
[B]Tell us what you think about this report: contact the strategist about the article at <[email protected]>[/B]
[B] [B]TREND ANALYSIS[/B] is based on a rolling pivot model. LONG TERM TREND is determined by the last 3 months of price data (high, low, close). SHORT TERM TREND is determined by the last 4 weeks of price data (high, low, close). R3, R2, R1, PL, PH, S1, S2, and S3 are provided to aid in identifying entries and exits. These are objective measures and our subjective analysis (STRATEGY) may differ.
[B]SCHEDULE[/B]
Monday: EURGBP, EURCHF, EURCAD, EURAUD, EURNZD
Tuesday: EURJPY, GBPJPY, CHFJPY, CADJPY, AUDJPY, NZDJPY
Wednesday: GBPCHF, GBPCAD, GBPAUD, GBPNZD
Thursday: AUDCHF, AUDCAD, AUDNZD
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