Yen Crosses Should Retrace Portion of Recent Decline

The EURJPY, in paricular, exhibits a clear short term pattern.  There are 5 waves down from just below 170, so a countertrend rally is expected over the next few weeks.  The advance could reach Fibo resistance, which does not begin until 164.34.

The decline from 169.97 morphed into 5 waves, making it highly likely that 169.97 was the end of the terminal thrust from the previous triangle (and large) triangle.  Regardless of the larger trend (now down from 169.97), expectations are for an advance, if only corrective, that brings price to the Fibo zone; which begins at 164.34.

The drop from 250 is in 3 waves to this point (A-B-C).  However, the advance from 192.60 is choppy and could therefore be a 4th wave that will give way to a 5th wave that ends below 192.60.  As long as price is below the trendline drawn off of the July 2007 and November 2007 highs, the preferred count is that the GBPJPY is headed lower (below 192.60).

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 below parity (100).  A cautious bullish bias is warranted against the trendline that is drawn off of the August 2007 and January 2008 lows.  Be aware though that a break of that line could lead to a violent sell-off that would not end until below 92.15.    

The potentially bullish implications from the CADJPY reversal candle last Wednesday remain.  A potential inverse head and shoulders pattern has formed, which is a bullish reversal pattern.  Signals are mixed though as the 200 day SMA is sloping down and therefore bearish…be careful.     

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.

The NZDJPY broke down over the last week and dropped to its lowest level since last August only to rebound over 400 pips from last week’s low.  Still, the trend is towards lower prices as long as price is below 81.65

Jamie Saettele writes Forex Technicals: The Day Ahead, Monday-Thursday (published at 6 pm EST), Daily Technicals  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.

Contact at [email protected]