Trade Idea: EUR/JPY - Buy On Break Of 127.08

EUR/JPY - 125.65

Recent wave: wave 2 is unfolding as a triple threes and should be limited to 123.00

Trend: Sideways

Original strategy

Buy on break of 127.08, Target: 129.00, Stop: 65 points

New trading strategy

Buy on break of 127.08, Target: 129.00, Stop: 65 points

Despite rising to 126.98 yesterday, the single currency failed to penetrate indicated resistance at 127.08 and has retreated, suggesting further consolidation would take place and retest of support at 124.45 cannot be ruled out, break there would signal the final leg of wave v is in progress for weakness towards 123.99 (61.8% projection of 133.65 to 126.55 measuring from 128.38), however, reckon 123.00 (100% projection of 138.49 to 126.95 measuring from 134.54) would hold.

Our latest preferred count is that the 3rd set of a-b-c of larger degree wave 2 is still in progress and only b leg ended at 134.37 (with a - 134.54, b - 127.32 and c - 134.37), hence c leg is now underway with minor wave i ended at 131.52, ii at 133.65, wave iii at 126.55 and wave iv at 128.38 and wave v has either ended at 124.45 or may extend one more fall to 123.99 (61.8% projection of 133.65 to 126.55 measuring from 128.38) before rebound.

In view of this, we prefer to buy on break of said resistance for such a rebound. Above said resistance would signal low has been formed, then stronger rebound to 128.38 and later towards 129.00/10 would follow but reckon resistance at 129.50 would hold from here.

On the daily chart, wave 2 from 139.26 which unfolded as a complex correction triple threes has ended at 126.95 with 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 in progress which should be limited to 123.00.

On the bigger picture, we are treating the rally to 169.97 as end of wave A, then followed by a selloff in wave B (abc-x-abc) at 112.08. The wave C from there should unfolding as an impulse with wave 1 of C ended at 139.26, then the 3-legged wave 2 should stay well above 120.00 and wave 3 should bring retest of 139.26, then towards 142.00 later this year.