We stated last week that “the decline counts better as a leading diagonal. This does not change the longer term outlook that calls for a sharp decline. The wave 2 top is probably close. The EURJPY is testing the 61.8% of the leading diagonal (167.64-151.71); a potential reversal point.” The EURJPY did reverse off of that level and although there is no confirmation that the wave 2 top is in place, risk is small at 161.71. As long as price is below 161.71, expectations are the EURJPY to decline and ultimately break below 151.71 and then 149.25.
As we mentioned last week, the failure at the resistance line on 4/4 keeps the picture bearish. The advance from 192.60 to 205.12 is in 3 waves, indicating that the rally is corrective. It is possible though that this is just the first leg of a correction; either a triangle or a flat. In either case, we would see lower prices near term though. The preferred count is that the decline from 205.12 is a 5th wave so we expect price to drop below 192.60.
The decline from 101.85 to 92.15 is only in 3 waves but could be wave A of a large flat correction or triangle in the CHFJPY. The 3 advance from 82.15 is in 3 waves and therefore most likely wave B. In both cases (flat or triangle), the near term implications are bearish until at least 95.12. Risk is tight on shorts at 101.85 and targets for a few months out (in the case of a flat) are the 100% and 161.8% extensions of 101.85-92.15/100.72 at 91.02 and 85.02.
We maintain that the CADJPY is headed lower longer term (the series of lower lows and lower highs inspires confidence in the bearish assessment). Potential resistance lines are at near the 50% at 102.65. Those lines should contain any strength but 102.65 is the bearish line in the sand for now. A rally through there indicates that the correction is not yet over and that price is likely headed for a test of 104.29 (61.8%) before the downtrend continues.
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 likely complete at 100.49. We wrote last week that “a small correction is underway (as in the other Yen crosses) and should end near the 61.8% of 100.49-88.14 at 95.77. Look for a top and reversal this week or next.” The reversal occurred last Wednesday and the pair should be headed lower again.
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. Near term, the rally from 76.73 to 82.10 is in 3 waves and therefore a drop to a new low is expected soon (below 76.73). An alternate count (that we are becoming more confident in as the pair fails to drop) is that the entire drop from 91.42 is an ending diagonal (similar to the EURJPY) and that a wave 2 correction is underway towards fibo resistance in the 84/85.80 area. A rally through 82.10 would make this the preferred count.
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[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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