EUR/JPY Elliott Wave Analysis

EUR/JPY: Rise from 112.08 is the beginning of wave C

On the daily chart, the rebound from 131.41 has finally broken above indicated upside target at 135.70 and this suggests the pullback from 139.26 has ended at 131.41 and our bullish count is that wave 1 of larger degree wave C ended at 137.42 and the 3-legged wave 2 from could have ended at 126.98 with a short c, hence wave 3 of C is unfolding with wave i of 3 formed a top at 139.26 and wave ii of 3 has ended at 131.41 last week.

Under this bullish count (actually is very bullish count), euro should continue to move higher and heading to 138.58 resistance, then towards wave 1 top at 139.26, once the currency pair is able to break through this level, this would be the confirmation that wave iii of 3 is taking place and swift rise to 140.05, then 141.03 (50% Fibonacci retracement of 169.97-112.08) would follow.

Although pullback to 135.65 (38.2% Fibonacci retracement of 134.35 to 136.45) cannot be ruled out, we expect 135.15 (61.8% Fibonacci retracement ) to contain correction from 136.45 and the single currency shall head north again to 136.93 (100% projection of 133.37 to 135.95 measuring from 134.35), then towards 137.54, being 1.236 times projection, however, price should falter below strong resistance at 138.58 (also just above 1.618 times projection at 138.52).

In the event price drops below indicated calculated support at 135.15, this would risk stronger pullback to 134.70/80, however, as long as support at 134.35 (wave (2) trough) holds, this bullish count remains. Loss of 134.35 support anytime would risk correction to 133.80/90 but support at 133.37 should hold.

To re-cap the corrective upmove from the record low of 88.93 (18 Oct 2000), the wave A from there is subdivided as: 1:88.93-113.72, 2:99.88 (1 Jun 2001), 3:140.91 (30 May 2003), 4:124.17 (10 Nov 2003) and 5 was ended at record high of 169.97 (21 Jul 2008). The brief but sharp selloff to 112.08 is viewed as a-b-c x a-b-c type of correction in wave B. The subsequent rally from 112.08 showed impulsive structure, therefore, we labeled it as wave 1 of C.

The long-term downtrend started from calculated price of 359.26 (Dec 1979). The sharp fall from there to 226.60 (Aug 1981) with impulsive structure is labeled as wave I and wave II was capped at 256.59 (Nov 1982). Wave III decline was contained at 140.58 (Feb 1989), the subsequent rebound to 198.59 (Aug 1990) is seen as wave IV, the subsequent 5-wavers decline from there finished at 88.93 (18 Oct 2000). The strong rebound from there to 169.97 (21 Jul 2008) is tentatively viewed as wave A and wave B selloff was followed and is possibly ended at 112.08 (21 Jan 2009).