Yen Crosses Show Signs of Reversing


[B]Commentary -[/B] It is possible that the CADJPY completed an ending diagonal at 118.20 but there is no evidence that a top is in place yet. A drop below 117.23 would warrant a bearish stance against 118.20 but only a decline below 114.97 confirms a top at 118.20. We are looking for a return to at least 113.40, and perhaps a much more significant reversal. The primary reasons for the bearish stance are the 5 waves (potentially) completed at 118.20 and the COT report, which indicates extreme CAD bullishness and extreme JPY bearishness. These are the conditions that lead to reversals.
[B]Strategy -[/B] Bearish on break of 117.23, against 118.20, initial target is 113.40

[B]Commentary -[/B] The CHFJPY is breaking to the upside. Although the risk of a pullback (or outright reversal) is high in the JPY crosses (due to speculative positioning as indicated by the COT report), the CHFJPY is breaking to the upside. The pair is in a 5th wave that began in March (the entire 5th wave advance began in June 2005). A measured objective for the end of the rally is the 61.8% extension of waves 1 through 3, which is at 102.66. Wave 5 would equal wave 1 at 102.62, so this is a level to watch closely.
[B]Strategy -[/B] Flat

[B]Commentary -[/B] The advance from 77.41 looks close to complete (or already complete). The rally from 87.51 is the beginning of wave 5, which has traced out an ending diagonal, much like the NZDUSD has. These patterns are usually followed by sharp reversals. We are looking for a return to the previous 4th wave at 87.51. Coming under 95.23 would be the first sign that a top is in place.
[B]Strategy -[/B] Bearish on break of 95.23, against 95.89, targeting 87.51