EUR/JPY – 129.99
EUR/JPY: Wave v as well as larger degree wave (C) ended at 94.11 and first leg of larger degree wave C upmove has possibly ended at 149.79 and wave 2 correction has possibly ended at 109.49.
Although the single currency met resistance at 130.77 last week and has traded narrowly since, reckon downside would be limited to 128.50-60 and renewed buying interest should emerge around 127.50-60, bring another rise later, above said resistance at 130.77 would extend recent upmove to 131.00, however, near term overbought condition should prevent sharp move beyond 132.00 and price should falter below 132.90-00 (1.236 times projection of 109.49-124.10 measuring from 114.85), risk from there has increased for a retreat to take place later.
The daily chart is labeled as attached, early selloff from 169.97 (July 2008) to 112.08 is wave (A) of B instead of end of entire wave B and then the rebound from there to 139.26 is wave (B), hence, wave (C) has possibly ended at 94.12 with a diagonal triangle as labeled in the daily chart, hence upside bias is seen for further gain. Recent rally above indicated retracement level at 116.69 (50% Fibonacci retracement of the intermediate fall from 139.26-94.12) adds credence to this view and signal major reversal has commenced but first leg of this wave C has possibly ended at 149.79, hence wave 2 has commenced with wave A ended at 126.09, followed by wave B at 141.06, wave C commenced and could have ended at 109.49, above 126.00 would add credence to this view, then headway to 130.00 would follow.
On the downside, although initial pullback to 129.00-10 and 128.00 cannot be ruled out, reckon 127.40-45 would limit downside and bring another rise to aforesaid upside targets. Only a drop below support at 126.49 would suggest top is possibly formed, bring test of previous resistance at 125.82 (now support), a sustained breach below this level would add credence to this view, bring correction to 125.15-20 but previous resistance at 124.65 would hold, bring another upmove later. In the unlikely event, euro drops below 124.65 on a daily basis, this would signal a temporary top is formed instead, then further fall to 124.00 and later towards support at 123.66 would follow.
Recommendation: Buy at 127.50 for 130.50 with stop below 126.50.
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 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 wave (A) of B. The subsequent rebound to 139.26 is (B) of B and (C) of (B) has possibly ended at 94.12 and in any case price should stay well above previous chart support at 88.93, bring rally in larger degree wave C towards 150.00.
