On July 12th, we released a report titled Euro Bears?It May be Time to Meet Yen Bulls. In the report, we suggested that Elliott Wave structure, Fibonacci relationships, and long term oscillators pointed to the possible end of a 6 year uptrend. More specifically, we remarked that 148.40-60 is a very key level in EUR/JPY. Yesterday, (August 10th) EUR/JPY rallied to 148.58 before reversing and trading over 100 pips lower. Is this the turn? Read on. Well take another look at EUR/JPY below.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
The July 12th report in its entirety is at http://www.dailyfx.com/story/special_report/special_reports/Euro_Bears___It_May_be_Time_1152747631957.html
The chart above is taken from the July 12th report and outlines the basis for the bearish case going forward. There are many Fibonacci relationships in Elliott Wave analysis, but some of them are on display below. The price distance of wave 3 is 161.8% of wave 1. When this occurs, the likelihood is good that the 3rd wave is extended which means that waves 1 and 5 will likely be similar in terms of price length. In order to estimate an end to wave 5, we can add the price distance of wave 1 to the beginning of wave 5. The result is; 124.14 + 24.46 (2,446 pips) = 148.60. This is very close to our 78.6% fibo of 164.53-88.69 at 148.30, confirming that zone as a significant level. The next chart will zoom in on Primary wave 5 and its sub-divisions on a daily timeframe.
