FX.co ★ EUR/JPY Elliott Wave analysis for February 26, 2013

Today's support and resistance levels:

S1: 119.86 R1: 120.59

S2: 119.43 R2: 121.21

S3: 118.73 R3: 121.97

Technical overview:

After a little detour to 125.22, we were ready for a powerful decline in wave c of the second zig-zag. As we have taken out support at 121.26, which marked the 23.6% corrective target of wave 3, we should now be looking for a continuation down to 117.28, where wave 4 will have corrected 38.2% of wave 3. The big question now should be whether we need another x-wave first and then the last zig-zag down to reach our target? As long as minor resistance at 120.87 and, more importantly, 121.40 protects the upside, we do not need another x-wave to fulfill our target at 117.28. However, if we break resistance at 121.40, we already are building this x-wave and should see a move closer to 122.42 and maybe even up to 124.05 if it becomes extreme, before the last zig-zag combination down to our target at 117.28.

Trading recommendation:

We short EUR from 124.45, move our stop lower to 121.45 and place our take profit target at 117.50.