Yen Crosses: Opportunities to Sell on Big Rallies

We still view the drop from 167.64 as a series of 1st and 2nd waves (following a major truncated 5th wave). However, the EURJPY has yet to accelerate lower in a 3rd of a 3rd wave as expected. As long as price is below 159.20, this very bearish (3rd of a 3rd decline) remains a possibility. A breach of 159.20 would suggest that wave ii (within the 5 wave drop from 166.65) is still underway and will complete after a spike through 161.40.

Regardless of the larger trend, the GBPJPY is due for a rally. There are 5 waves down from the November high at 241.35. Expect a test of the center of the triangle near 210 in the coming weeks. The 38.2% of 241.35-192.60 is at 211.22. Near term, a small b wave is either unfolding now or is complete at 195.09.

The decline from 101.85 to 92.15 is only in 3 waves but could be wave A of a flat correction. The 3 wave advance is a classic B wave. Risk is tight on shorts at 101.85 and targets for a few months out are the 100% and 161.8% extensions of 101.85-92.15/100.72 at 91.02 and 85.02. For a more in depth look at the CHFJPY, see CHFJPY Plunge.

We maintain that the CADJPY is headed lower longer term (the series of lower lows and lower highs inspires confidence in the bearish assessment). However, a countertrend rally is underway now that likely reaches 101 (38.2% of 109.62-95.68) or even 104.30 (61.8% of 109.62-95.68). The decline from 109.62 is in 5 waves and the rally from 95.68 serves to correct that rally. The aforementioned 101 and 104.30 are potential reversal points.

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. Near term, 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.

To be honest, the NZDJPY pattern is unclear at the moment. Specifically, the price action since mid October is a mess. This is usually a sign that the pattern in question is a B wave. In this case, the up-down sequence from the August 2007 low at 74.25 could be waves A and B in a correction of the 97.74-74.25 decline. If this is correct, then the NZDJPY is in for a large rally. Another count is bearish as long as price is below 88.11.

[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.