Yen crosses are setting up for a major collapse. Risk is clearly defined.
We are presenting 2 short term counts. Both are bearish but one is ‘more bearish’. Both counts are the same until 163.88. The count in black suggests that the EURJPY decline from 163.88 and rally to 163.09 was wave i and ii of 5. Under this count, wave 5 continues lower as long as price is below 163.09. Price would decline in wave iii of 5 and the objective is near 158. The other ‘more bearish’ count suggests that wave (1) of large C is complete at 160.86 and that wave (2) of C is complete at 163.09. Wave (3) would be underway and would accelerate in the weeks ahead, probably ending below 150. Either way, both counts suggest positioning for a decline against 163.09. A short term rally is likely but look for resistance in the 161.50/90 zone.
We maintain that the GBPJPY is headed lower in a 5th wave that will end below 192.60. Weakness from 215.83 may be nearing a medium term low (shown above), although there is the possibility of weakness extending from current levels. In such a case (extension), price would remain below 204.57 and continue on lower in a 3rd wave. A push through 204.57 would indicate to us that a larger correction, perhaps back to 207.25 or higher, is underway.
The big picture focus remains on the A-B-C advance from the 2000 low at 58.82. Wave C would equal wave A (arithmetically) at 112.27 but waves A and C do not have to be equal prior to a reversal. The advance has already satisfied minimum expectations and a long time support line has acted as resistance since December 2007. Price plummeted from the line and is now testing a support line drawn off of the August 2007 and January 2008 lows. A drop below there most likely leads to a drop that ends below 92.15.
The potentially bullish implications from the CADJPY reversal candle last t Wednesday’s ago remain. A potential inverse head and shoulders pattern has formed as well, which is a bullish reversal pattern. Signals are mixed though as the 200 day SMA is sloping down and thwarted today’s rally attempt, indicating that bears are in control as long as price is below 107.14.
One thing is clear regarding the AUDJPY. That is, the advance from 85.98-107.84 (November 2007) was in 5 waves. Since then, the AUDJPY has been stuck in an enormous consolidation. One possible count is that the drop from 107.84, which was in 3 waves, was wave W of a complex correction. The advance to 104.45 would serve as wave X and wave Y would be underway now. The minimum bearish objective under this count is below 85.98. A bearish bias is warranted as long as price is below 96.10.
We maintain a bearish bias as long as price is below 78.97 (risk has been lowered over 450 pips from last week). A B wave triangle is complete at 82.73 and the C wave acceleration lower should be underway (again…78.97 is the line in the sand for bears). A potential objective is the June 2004 low near 67.50.
[B]Jamie Saettele writes [I]Forex Technicals: The Day Ahead[/I], Monday-Thursday (published at 6 pm EST), [I]Daily Technicals [/I] every weekday morning (9 am EST), COT analysis (published Monday mornings), and analysis of currency crosses throughout the week. He is also the author of Sentiment in the Forex Market.[/B]
[B][/B]
[B]Contact at <[email protected]>[/B]