Trade Idea: EUR/JPY – Sell at 132.90

EUR/JPY – 132.08

Original strategy:

Sell at 133.90, Target: 132.30, Stop: 134.50

Position: –
Target: –
Stop: –

New strategy :

Sell at 132.90, Target: 131.30, Stop: 133.50

Position: –
Target:  –
Stop:-

As the single currency has dropped quite sharply yesterday and has remained under pressure, adding credence to our view that a temporary top has been formed at 134.41 last week, hence consolidation below this level would be seen with mild downside bias for weakness to 131.50, then 131.00-05 break there would bring retracement of recent upmove towards support at 130.62 which is likely to hold from here due to near term oversold condition. 

In view of this, we are looking to sell euro on recovery but at a lower level as 132.90-00 should limit upside. Above previous support at 133.43 would abort and suggest at least first leg of decline from 134.41 has ended, bring a stronger rebound to 133.90-00 but still reckon said resistance at 134.41 would remain intact, bring further consolidation.  

Our latest preferred count is that wave (ii) is ABC-X-ABC which ended at 123.33 and wave (iii) is unfolding with wave iii ended at 100.77, followed by wave iv at 111.57 and wave v as well as the wave (iii) has ended at 97.04, followed by wave (iv) at 111.43 and wave (v) has ended at 94.12 which is also the end of the larger degree v, this also implied the major wave (C) has also ended there, hence major correction has commenced from there with (A) leg unfolding in its lower degree wave c which has possibly ended at 145.69. Under this count, A-B-C wave (B) has commenced with A leg ended at 136.23, wave B at 143.79 and wave C has possibly ended at 149.79.

Our larger degree count is that the decline from 139.26 is wave (C) and is sub-divided into a diagonal triangle i-ii-iii-iv-v with wave i – 105.44, wave ii- 123.33, wave iii – 97.03, wave iv – 111.43, followed by the final wave v as well as the end of wave (C) at 94.12, this also mark the bottom of larger degree wave B. Under this count, major rise in wave C has commenced as an impulsive wave with minor wave III ended at 145.69, wave V is still in progress for further gain to 150.00. Having said that, this so-called wave V could well be the first leg of larger degree 5-waver wave C and this wave C should bring at least a retest of wave A top at 169.97 (July 2008).