EUR/JPY has pushed about 70 points higher from the channel into what I think will be 155.00-50 area resistance. The interesting part here is that both EURU/SD and USD/JPY have made strong moves higher from the 1.2985 and 118.00 levels, respectively. What this tells us is it's likely EUR/JPY that is dictating price action within the three. Now, if EUR/JPY does hold 155.50 resistance and begins to move lower, I think USD/JPY will find more selling interest than EUR/USD. This is because EUR/USD has shown on several important occasions in the last few days to have much stronger 1.2980-1.3000 buying interest than does USD/JPY at 118.00. So the path of least resistance will be USD/JPY lower and EUR/USD higher. We are still working USD/JPY short positions in this B-wave correction. Provided we stay below 119.40, USD/JPY should eventually bring us down to the 1.0 Fib projection target of 117.30. If you are still short a piece of USD/JPY, hang onto them because I am reissuing USD/JPY short trades tonight.
There is a smaller A-B-C-correction within this larger B-wave correction that I mentioned above. The distance of Wave A will equal Wave C at 119.15. Further, .786 retracement of wave A will equal 119.31 for the end of wave B. So we have 119.15 and 119.35 to lean against to establish new short positions with stops just above 119.50. Now, if you are still short a partial from Friday, you could re-offer that partial you closed profitably into the zone and bring your stop for everything up to 119.55.
Todd Gordon is a Technical Currency Strategist and Fund Trader with GAIN Capital Group.
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