Yen Crosses are Violent but Present Opportunities

The Yen crosses are a violent bunch but there are great opportunities right now.  Most notably, the EURJPY may be forming a secondary low.

We wrote last week that “a bullish bias is warranted against 158.60 but with 5 waves up from there, the EURJPY is susceptible to a correction back to at least 165.31.”  165.31 gave way and price spiked below the 61.8% of 158.60-169.97, finding support near the 6/4 low of 161.73.  There is a chance that a wave 2 low (within the bullish cycle from 158.60) is in place. 

The drop from 250 is in 3 waves to this point (A-B-C).  However, the advance from 192.60 is choppy and could therefore be a 4th wave that will give way to a 5th wave that ends below 192.60.  As long as price is below the trendline drawn off of the July 2007 and November 2007 highs, the preferred count is that the GBPJPY is headed lower (below 192.60).

The big picture focus remains on the A-B-C advance from the 2000 low at 58.82.  Wave C would equal wave A (arithmetically) at 112.27 but waves A and C do not have to be equal.  The advance has already satisfied minimum expectations and a long time support line has acted as resistance since December 2007.  Price plummeted from the line and tested 100 today.  A cautious bullish bias is warranted against the trendline that is drawn off of the August 2007 and January 2008 lows.  Be aware though that a break of that line could lead to a violent sell-off that would not end until below 92.15.    

The CADJPY has declined as expected but today’s reversal candle suggests that the decline may be nearing an end.  As such, we are moving from bearish to neutral.  Price remains below the 200 day SMA (which exhibits negative slope), which is bearish.  However, a potential inverse head and shoulders pattern has formed, which is a bullish reversal pattern.  Signals are mixed…be careful.     

Could the AUDJPY be setting up for a larger bullish break?  The count above is a bullish triangle.  There are of course alternate counts and the pair could still decline near term even under this count and test triangle support near 90.  

The NZDJPY broke down over the last week and dropped to its lowest level since last August only to rebound over 300 pips from today’s low.  Still, the trend is towards lower prices.  Look for resistance near former congestion from earlier this month in the .7850-.79 zone.  This level also intersects with the underside of a former support line.

Tell us what you think about this report: contact the strategist about the article at jsaettele@dailyfx.com