Yen Crosses: Choppy Corrections to Continue Higher on Balance

I wrote last week that “the decline from 131.08 has traced out 5 waves as the EURJPY has made a new multi year low (dropping below the October low of 113.59).  A multi-week low is most likely in place and expectations are for a return to former resistance at 122.”  Near term, it is unclear what the form of the advance from 112.040 is taking.  For example, the rally from 112 could be a series of first and second waves or a zigzag and an x wave that is underway now.  Being in the middle of a correction, it is difficult to control risk from a trading standpoint.  If price drops below 116.09 (in what would be a small flat), then there is a bullish opportunity against 112.    

I wrote last week to “expect a rally from current levels, potentially to 129.82, before the decline resumes.”  The advance from 118.79 is in 5 waves (much like the GBPUSD), so a decline is expected in order to correct the advance.  Support begins at 124.28. 

I wrote last week that “a break below 74.66 is expected but not before a corrective rally.  The pair could reach former resistance at 82.09.”  The corrective rally is probably at about its midpoint.  Near term, a b wave is underway that could come under 77.45 before the rally resumes. 

The rally from 68.36 is in 5 waves, therefore expect a corrective decline to begin soon.  Support begins at 71.83.  Momentum indicators such as RSI are in overbought territory on the hourly, which supports the short term bearish scenario.        

Since the October 2008 low, the AUDJPY has been in a contracting range (although the range does not appear to be a triangle).  There are a number of possibilities with regards to the potential count.  Structurally, the trend is bearish as long a price is below 62.28.  A rally through there brings to the forefront the count above; which is a flat from the October low in which wave C would be underway now and end above 70.58.  Until 62.28 is broken, getting bullish is dangerous.

It is possible to count 3 waves down from the July 2007 high.  If the decline from the top is unfolding as an impulse, then the NZDJPY may be about ready to begin a 4th wave that could reach former resistance at 56.39 (would take several months).    

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.

Contact him at jsaettele@dailyfx.com