Trade Idea: EUR/JPY - Stand Aside

EUR/JPY – 122.42

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

Stand aside

The single currency tumbled after faltering below indicated near term key resistance at 127.08 and resumed recent decline, suggesting the wave c from 134.37 is still in progress and although euro has recovered after falling to 121.57 yesterday, upside should be limited to 124.00 and resistance at 124.45 (wave iii trough) and bring another decline later. Below 121.57 would extend weakness to 120.50 and possibly 120.00.

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 124.45 (instead of 126.55) and wave iv at 126.98 (instead of 128.38) and wave v may extend to 120.25/30 (1.236 times projection of 138.49-126.95 measuring from 134.54) before rebound.

We prefer to stand aside in the meantime and wait for recovery back to 124.45 before entering short position. Only above 125.90/00 would suggest a temporary low is possibly formed and bring test of 126.98-127.08 resistance. Once this level is penetrated, this would confirm low has been formed and bring correction towards 128.00/10.

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 120.00.

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.