FX.co ★ Elliott Wave Analysis of EUR/JPY for December 5, 2012

Today's Support and Resistance Levels:

S1: 107.73 R1: 108.33

S2: 107.61 R2: 108.89

S3: 107.52 R3: 109.16

Technical Overview:

We saw support at 106.84 protecting the downside for a clear and powerful break above 107.67. It does not only call for a continuation higher towards 108.33 and 108.89 as the next targets, but more importantly it removes the risk for an expanded flat correction building. Therefore, we have removed that option and marked the decline from 107.67 to 106.85 as wave ii. That means we are now in wave iii of 3 which is often the most powerful part of an impulsive 5 wave rally. Trying to go short in such circumstances in many cases may lead to your stop will be hit shortly after you have entered your short position.
In the short term we have a resistance point at 108.00, but a break above will trigger a lot of stops and likely cause the ongoing rally to move even higher and faster towards our major target at 110.83.

Trading Recommendation:

You should be long EUR from 106.20. Raise your stop to 106.80. If you are not long EUR already, then you should buy if you see a small set-back towards the 107.61 - 107.72 area with the same stop.