Yen Crosses: Plunge Confirms Long Term Reversals

I wrote last week that “price is testing a short term resistance line and divergence with RSI above 70 favors a reversal.  Favor the downside against 139.17.”  Today’s plunge is typical of 3rd wave price action.  That is, the decline is exceptionally strong (as 3rd waves are).  More much downside is expected, albeit not in a straight line.  Near term (within a week), the decline should extend to 124.50 (161.8% extension and 4/28 low).  129.80 is potential near term resistance.

From last week: “Fitting with the top and reversal theme, a head and shoulders top is still visible in the GBPJPY.  While the pattern warns of a break lower, a drop below the support line drawn off of the January, April, and May lows would indicate that the rally from 118.79 is complete.”  The GBPJPY broke hard today as well and the entire rally from 118.79 should be retraced (eventually).  Near term, there is potential resistance at 151.00.  The next chart support is 143.00.

The bearish CHFJPY count also played out.  The decline has already reached the bottom of the 4th wave triangle.  The larger trend is again considered down and there is potential resistance at 86.00.  Price should remain below 88.28.

Last week’s commentary was that “the CADJPY has broken beneath channel support, which is strong evidence that the rally from the January low is complete.  More importantly, the structure of the CADJPY decline is bearish.”  The drop has accelerated and price should remain below 82.60 on its way lower.  80.60 is potential resistance. 

The AUDJPY top and reversal count proved correct.  A 3rd wave decline is underway from 78.40.  The next target is 66.80 (origin of the ending diagonal).  Price should stay below 76.65 and there is potential resistance at 73.50.    

Last week I wrote that “RSI divergence continues to warn of a top and reversal in the NZDJPY.  A daily close below the line extended from the 4/28 and 5/18 lows would suggest that a top is in place.”  The NZDJPY closed below the line on July 2 and the drop has extended.  Price should remain below 61.00 on its way the 52.90 target (April 28 low).  58.90 is potential resistance.

Jamie Saettele publishes Daily Technicals every weekday morning (930 am EST), COT analysis (published Monday mornings), technical analysis of currency crosses throughout the week (EUR on Tuesday, JPY on Wednesday, GBP on Thursday, AUD on Friday), and the DFX Trend Index every day after the NY close.  He is also the author of Sentiment in the Forex Market.

Please send comments about this report to jsaettele@dailyfx.com