Yen Crosses: Longer Term Declines to Resume

We had previously viewed the drop from 167.64 as a series of 1st and 2nd waves.  Upon closer inspection, the decline 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.  The EURJPY is testing the 61.8% of the leading diagonal (167.64-151.71); a potential reversal point.  The next level to look for a reversal would be where wave c would equal wave a within the zigzag from 151.71; which is at 162.67.  The bearish line in the sand is 167.64. 

Last week we wrote that “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 pair did rally, but only to 205.12 before failing at trendline resistance.  The advance could be wave 4 or the first leg of a 4th wave (maybe a triangle?) in a 5 wave decline from above 250.  The presence of the trendline warrants a bearish bias against 205.12.  

The decline from 101.85 to 92.15 is only in 3 waves but could be wave A of a large flat correction or triangle in the CHFJPY.  The 3 advance from 82.15 is in 3 waves and therefore most likely wave B.  In both cases (flat or triangle), the near term implications are bearish until at least 95.12.  Risk is tight on shorts at 101.85 and targets for a few months out (in the case of a flat) are the 100% and 161.8% extensions of 101.85-92.15/100.72 at 91.02 and 85.02.  

We maintain that the CADJPY is headed lower longer term (the series of lower lows and lower highs inspires confidence in the bearish assessment).  We wrote last week that “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.”  The CADJPY reached 102.26 yesterday and has come down to 101.07.  Potential resistance lines are at near the 50% at 102.65.  In other words, look for the longer term downtrend to continue this week or next.        

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.  We wrote last week that “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.”  The AUDJPY is just below that level so look for a top and reversal this week or next.

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.  The pair is in a former congestion area that extends to 83.67.  This zone should provide the resistance needed for the longer term downtrend to continue.        

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TREND ANALYSIS 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. 

SCHEDULE

Monday: EURGBP, EURCHF, EURCAD, EURAUD, EURNZD

Tuesday: EURJPY, GBPJPY, CHFJPY, CADJPY, AUDJPY, NZDJPY

Wednesday: GBPCHF, GBPCAD, GBPAUD, GBPNZD

Thursday: AUDCHF, AUDCAD, AUDNZD