We stated last week that “the decline from 167.73 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.” That wave 2 top might be in place at today’s high. The EURJPY touched a resistance line that dates to October AND the other side of what was once a support line (which dates back to 2000). 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. This bearish count remains intact as long as price is below 167.73.
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. On the 60 minute chart, the GBPJPY decline from 208.94 (former congestion from wave iv), is in 5 waves, indicating that the larger trend is back down.
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. The legs within wave B would be equal at 103.69, although a reversal could occur at any time.
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 high on Friday reversed at a trendline drawn off of the 12/27/07, 2/26/08, and 4/18/08 highs. This level is defended by the 50%-61.8% of 109.62-95.68 at 102.65/104.29. The longer term downtrend is probably back underway.
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. As long as price is below 100.49, the longer term bearish assessment is valid. In fact, what is viewed as a 2nd wave rally from 88.14 has touched the confluence of the 78.6% of 100.49-88.14 / trendline drawn off of the 11/1/07 and 2/28/08 highs. Ideally, this level holds as resistance.
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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