EUR/JPY: Rebound from 112.08 to 139.26 is wave (B) and wave (C) is unfolding
The single currency has resumed recent downtrend as suggested in our previous update and although price has recovered after falling to 105.44 earlier this week, upside should be limited to 109.00/10 and bring another decline later. Break of said support would extend decline in wave iii for weakness to 104.42 (50% projection of 127.95 to 107.30 measuring from 114.74) and possibly 103.00 but price should stay well above 101.98 (61.8% projection).
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 commended from there with minor wave 1 ended at 119.66 and wave 2 at 127.95 and wave 3 is unfolding and may extend eventual weakness towards 104.42 (50% projection of 127.95 to 107.30 measuring from 114.74).
To recap this wave C from 139.26 is sub-divided into (a): 127.00, (b) 138.49 and wave (c) has commenced from there with a diagonal wave 1 (i: 126.95, ii: 134.37, iii: 120.70, iv: 125.24 and then wave v at 119.66). The rebound from 119.66 to 127.95 was an a-b-c wave 2 and wave 3 is taking place from 127.95 with minor wave i ended at 110.49, followed by wave ii ended at 122.29.
On the upside, only above 110.00/10 would defer and risk retracement to 111.00/10 but reckon 112.03 (previous support turned resistance) should hold, bring another decline. Only break of later resistance would suggest a temporary low has possibly been formed and risk retracement to 113.00 and possibly test of resistance at 114.19 and 114.74.
Recommendation: Sell at 109.00 for 106.00 with stop above 110.20.
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) is underway which should be limited to 100.00.
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 may extend to 105.00. 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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