Yen Crosses Stair Step Lower; Selling Rallies Now Favored

Euro / Japanese Yen

240 Minute Bars

Prepared by Jamie Saettele, CMT

The EURJPY remains supported ahead of its 3/22 low. Bigger picture however, a key reversal formed last week and this week’s failed test of last week’s high is suggestive of distribution. Don’t forget that the recent rally also failed at the 10/31/11 intervention high. As such, reward/risk at this point warrants a bearish stance in anticipation of a break under 10848 and continuation towards 10740 and maybe even the March low at 10564 or the mid-10400s (50% retracement of rally from January low). 10990 is resistance. Note that trading reversals is extremely difficult and often requires several attempts.

Bottom line (next 5 days): sideways/lower

British Pound / Japanese Yen

240 Minute Bars

Prepared by Jamie Saettele, CMT

The GBPJPY remains supported ahead of its 3/23 low. Bigger picture however, a key reversal formed last week and this week’s failed test of last week’s high is suggestive of distribution. The well-defined Elliott channel has been broken as well. As such, reward/risk at this point warrants a bearish stance in anticipation of a break under 13000 and continuation towards 12815 and maybe even the March low at 12654 or 12538 (50% retracement of rally from January low). 13180 is resistance. Note that trading reversals is extremely difficult and often requires several attempts.

Bottom line (next 5 days): sideways/lower

Australian Dollar / Japanese Yen

240 Minutes Bars

Prepared by Jamie Saettele, CMT

Much is made of the head and shoulders pattern. I get dozens of emails and tweets everyday proclaiming the existence of head and shoulders patterns across multiple time frames and markets. I take issue with these proclamations because the pattern can’t exist until it is confirmed by a neckline break. Well, AUDJPY price pattern throughout March is a good example of an actual head and shoulders pattern. For the first time in many months, selling rallies is warranted. Resistance is 8610 and even 8660. I wouldn’t even dismiss a diabolical tag of 8757 from Mrs. Market just to confound participants (although that seems quite unlikely). The next bear leg targets are 8385, 8285, and maybe 8055. Keep the bigger picture in view. The last 5 weeks have spent time at the resistance line that extends off of the November 2007 and July 2008 highs and a bearish key reversal formed last week. Note that trading reversals is extremely difficult and often requires several attempts.

Bottom line (next 5 days): sideways/lower

Canadian Dollar / Japanese Yen

Daily Bars

Prepared by Jamie Saettele, CMT

Last week’s key reversal occurred at the trendline that extends off of the 2010 and 2011 highs. Reward/risk at this point warrants a bearish stance in anticipation of a break under 8185 and continuation towards 8040 and 7965 (October 2011 intervention high). 8295-8410 is resistance. Note that trading reversals is extremely difficult and often requires several attempts.

Bottom line (next 5 days): sideways/lower

New Zealand Dollar / Japanese Yen

Daily Bars

Prepared by Jamie Saettele, CMT

A key reversal formed in the NZDJPY last week. My interest is piqued as the reversal occurred within pips of the 2009, 2010, and 2011 highs. As such, reward/risk at this point warrants a bearish stance in anticipation of a break under 6656 and continuation towards 6529 and 6450 (October 2011 intervention high). 6755-6855 is resistance. Note that trading reversals is extremely difficult and often requires several attempts.

Bottom line (next 5 days): sideways/lower

--- Written by Jamie Saettele, CMT, Senior Technical Strategist for DailyFX.com

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Jamie is the author of Sentiment in the Forex Market.