Yen Crosses Put Forth Rally Attempts

There are a number of possibilities for the EURJPY at the current juncture.  A 5 wave decline from the top near 170 preceded the consolidation that has taken place since late October.  The consolidation is either a B wave within an A-B-C decline or part of a second wave within an impulse.  I favor the triangle scenario but there is short term upside potential to 126 if the EURJPY breaks through the resistance line near 122.50.    

I mentioned last week that “there are signs of at least a short term recovery.  From 148.69, the GBPJPY has fallen in 5 waves, therefore a move back to at least former resistance near 141 is likely.  A larger recovery is also an option as the mentioned 5 wave drop could have completed a larger decline as well.”  The recovery ended at 140.83 and the rally to that point appears corrective.  At this point, wave structure favors the downside but I want to warn that a bottom may have formed based on the fact that the decline from 215.96 is in 5 waves.  The risk to turning outright bullish now is that wave 5 could extend.  Divergence with RSI does favor the bullish scenario though.

CHFJPY is putting to test the resistance line drawn off of the September, October, and November highs.  A move above there would be bullish and shift focus to 80.  Divergence with RSI on the daily favors bulls.

After testing the low near 70, the CADJPY has bounced back.  As long as support holds (70.56), it is possible that a large 4th wave triangle or flat is underway.  If a triangle, then the CADJPY should reach at least 80. 

The rally from 55.01 in the AUDJPY is viewed as wave a of 4.  Strength is expected to accelerate in wave c of 4 and end above 70.58.  74.58 is potential resistance.  Coming under 56.83 would indicate additional downside potential and put the October low of 55 at risk. 

It is possible that the NZDJPY has formed an important low at 47.76.  There is evidence on the daily chart such as continued divergence with momentum indicators.  On shorter time frames such as the 240 minute bar chart above, RSI recently moved into overbought territory, if for only just a moment.  I view this as bullish.  At the beginning of up-trends, RSI will move into overbought territory initially and then pullback before strength resumes.

Jamie Saettele writes Forex Technicals: The Day Ahead, Monday-Thursday (published 6-7 pm EST), Daily Technicals  every weekday morning (9-10 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.