FX.co ★ Elliott Wave Analysis of EUR/JPY for January 3, 2013

Today's Support and Resistance Levels:

S1: 114.52 R1: 114.88

S2: 114.21 R2: 115.30

S3: 113.96 R3: 115.64

Technical Overview:

Looking at the shorter time frame it is likely we saw a rare fifth wave failure at 115.96 yesterday. The failure to break into new high ground materialized to powerful correction, which has reached 114.46 as its low point. However, a break below 114.40, and more importantly a break below 113.99, is needed to confirm that we indeed observed the top of wave 3 at 115.96 and wave 4 is under way. If we have entered into the wave 4 correction we should see a correction down to at least 112.30. That said, as long as support at 114.40 protects the downside we will look for a new rally higher towards 115.22, but only a break above 115.99 revives the uptrend for a move higher towards the 117.30 - 117.85 area.

Trading Recommendation:

We were stopped out of our longs from 115.54 at 114.75 for a small loss. As the overall picture has become unclear, we will sidestep this market for now and wait for the picture to clears up.