EUR/JPY Elliott Wave Analysis

EUR/JPY – 122.57

EUR/JPY: Wave 2 correction from 139.26 is still unfolding and may fall to 121.00

The single currency extended recent c leg decline in line with our expectation in our previous update and downside target at 124.00 and 123.00 had been met, whilst further weakness to 121.00 is likely, as this move is still viewed as the last leg of wave 2 from 139.26, reckon downside would be limited to 120.28 (1.236 times projection of 138.49-126.95 measuring from 134.54) and 119.00 should hold on first testing.

Our preferred count remains that the upmove from 112.08 is wave 1 of C has ended at 139.26 with minor wave iii ended at 137.42, followed by triangle wave iv at 126.98, then wave v at 139.26. The move from there is wave 2 and is unfolding as a triple three,. abc-x-abc-x-abc, and is labeled as: first set of a-b-c ended at 127.00, then x wave at 138.72, followed by second set of a-b-c at 129.02, then another x wave at 138.49 with the third set of a-b-c marked as: a-126.95, b-134.37 and the c leg is still unfolding but should be limited to 120.28.

On the upside, whilst the recovery from 121.57 (yesterday's low) suggest minor correction to 123.90/00 is likely, reckon 124.45 (previous support turned resistance) would cap rebound and bring another decline to aforesaid downside targets. Only a daily close above 125.95/00 would suggest low is possibly formed and risk test of 126.98-127.08 resistance but break there is needed to confirm, then stronger rise towards 130.00 would follow.

Looking ahead, only breach of 135.76-136.00 resistance area would revive our bullish count and signal wave 2 has indeed ended, then headway to 137.00 and later test of resistance at 138.49 would follow.

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 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 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). Our alternate count is that entire wave IV correction already ended at 169.97, hence fall to 112.08 would be treated as the wave 1 of V.