Commentary - Last week, we wrote that, “a cautious bearish bias is warranted against 111.30 since wave 2 could be complete there. Remember though that a decline below 106.66 could be wave B. The structure of the decline will determine whether or not wave 3 is underway.” Sure enough, the drop below 106.66 was wave B and ended at 106.50. The most likely next move is wave C to above 111.30 for a test of 112.54 (61.8% of 118.20-103.38). Potential reversal points above 112.54 are the 100% extension of 103.38-111.30/106.50 at 114.42 and the 78.6% at 115.03.
Strategy - Flat
Commentary - We wrote last week that “a triangle could also be unfolding, in which case, price would range between 94.67 and 97.21 for most of this week before a break higher in a terminal thrust.” It seems likely now that a triangle is unfolding as large wave B within an A-B-C correction from 92.15. Additional consolidation to complete waves d and e within the triangle should give way to a terminal thrust towards the 61.8% of 101.85-92.15 at 98.14 before the downtrend resumes. The 78.6% at 99.77 is also a possible reversal point.
Strategy - Flat
Commentary - Last week, we wrote that “one more rally leg should lead to a test of the 61.8% of 97.74-74.25 at 88.77 before the larger downtrend continues. A test/thrust below 78.24 is possible before the rally towards 88.77 takes place.” The thrust lower ended at 76.97 and the NZDJPY has turned higher in impressive fashion, giving us confidence in our outlook for a rally towards 88.77 (roughly) before the downtrend resumes.
Strategy - Bullish against 96.97, target 88.77 (then look to flip)
Written by Jamie Saettele, Technical Currency Strategist of DailyFX.com