Trade Idea: EUR/JPY — Buy At 120.00

EUR/JPY - 122.41

Recent wave: wave 2 is unfolding as a triple threes and should be limited to 123.00

Trend: Sideways

New trading strategy

Buy at 120.00, Target: 122.00, Stop: 119.30

Although the single currency rebounded after Friday's selloff to 120.70, a firm breach above resistance at 123.33 (Friday's high) is needed to signal the wave v of the c leg from 134.37 has possibly ended there and bring correction of recent decline towards 124.45 (wave iii trough), otherwise, retest of said support cannot be ruled out, below would suggest the final leg of wave v is underway to 120.00 before prospect of a strong rebound later this week.

Our latest preferred count is that the 3rd set of a-b-c of larger degree wave 2 is still in progress and only b leg ended at 134.37 (with a - 134.54, b - 127.32 and c - 134.37), hence c leg is now underway with minor wave i ended at 131.52, ii at 133.65, wave iii at 124.45 (instead of 126.55) and wave iv at 126.98 (instead of 128.38) and wave v may extend to 120.25/30 (1.236 times projection of 138.49-126.95 measuring from 134.54) and possibly 120.00 before rebound.

We prefer to buy on next decline or look to buy on pullback once said resistance is penetrated. Looking ahead, once resistance at 124.45 (previous support) is penetrated, this would confirm low is formed, then stronger rebound to 125.90/00 would follow but reckon resistance at 126.98-127.08 would hold from here.

On the daily chart, wave 2 from 139.26 which unfolded as a complex correction triple threes has ended at 126.95 with first set of a-b-c ended at 127.00, then x wave at 138.72, followed by second set of a-b-c at 129.02, then another x wave at 138.49 with the third set of a-b-c marked as: a-126.95, b-134.37 and the c leg is still in progress which should be limited to 120.00.

On the bigger picture, we are treating the rally to 169.97 as end of wave A, then followed by a selloff in wave B (abc-x-abc) at 112.08. The wave C from there should unfolding as an impulse with wave 1 of C ended at 139.26, then the 3-legged wave 2 should stay well above 120.00 and wave 3 should bring retest of 139.26, then towards 142.00 later this year.

Based on ActionForex.com Technical Outlook