EUR/JPY: Wave 2 correction from 139.26 ended at 127.00
The single currency rallied after breaking indicated resistance at 132.00/10 and the move gathered momentum thereafter and surged to 136.03 earlier today. This breach of indicated key resistance at 135.49 has reinforced our view that the fall from 138.72 is merely a wave ii correction, which has ended at 129.02 and bullishness remains for subsequent test of 138.72.
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 the move from there to 127.00 is wave 2 with a: 131.42, b: 136.90, wave c: 127.00. The rise from 127.00 to 138.72 suggests the wave 3 has possibly commenced with wave i ended at 138.72 and wave ii has ended at 129.02 and wave iii of 3 is taking place for gain to aforesaid upside targets. Looking ahead, a rise above resistance at 138.72 is needed to add credence to this view for retest of recent high at 139.26 and 140.00.
On the downside, whilst pullback to 134.00 cannot be ruled out, 132.25 should remain intact and bring such an upmove. Loss of latter support would prolong choppy consolidation and risk 131.00 or even 130.00 but support at 139.02 should remain intact.
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). 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.
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