Yen Crosses Bounce Could Be a Correction

CADJPY

CHFJPY

NZDJPY

Commentary – We wrote last week to expect a wave 4 correction to be followed by a new high before the larger reversal.  This count is tracking well as wave 4 ended at 115.79, just above the 38.2% of 106.50-121.26 (wave 3) at 116.62.  A push through 121.26 would possibly complete 5 waves up from 103.38 and give way to a reversal.  The pattern is bull as long as 115.79 holds.  The bearish alternate treats the declining legs from 120.14 as a series of 1st and 2nd waves.  That count would be favored on a drop below 115.79. 

Strategy – Flat

Commentary – We wrote last week that “there is no reason to change our outlook for a top and reversal.  Near term, there may be 5 waves down from 99.96, so a corrective rally could unfold from current price.  The 61.8% of 99.96-98.38 is potential resistance at 99.36.”  After rallying to 99.23, the CHFJPY dropped in impulseive fashion in what is either wave c to complete an a-b-c correction or wave 3 in a 5 wave bear cycle from 99.96.  We favor the latter interpretation and maintain a bearish stance against 99.96.  Ultimately, we expect price to make its way lower, ultimately coming under 92.15.

Strategy – Remain bearish, move risk to 99.96, (from101.85), target TBD

Commentary – The decline from 91.42 to 83.61 could be a 3 wave correction of the 76.93-91.42 advance.  However, overlap between the 8/27 high at 84.85 and 10/22 low at 83.61 warns of a weak structure and more importantly, suggests that something bearish is brewing.  Under the bearish count, price has fallen in a series of 1st and 2nd waves and the decline will accelerate in the next few days.  The bearish count is valid as long as price is below 88.34 (red line on chart).  A bearish bias is strengthened on a decline below 83.61.  Subjectively, we favor the bear count, primarily due to the larger degree trend (large A-B-C from 97.74).

Strategy – Bearish now, against 88.34, target below 83.61 (and much lower)