FX.co ★ EUR/JPY Elliott Wave Analysis for September 9 - 2012

Today's Support and Resistance Levels:

S1: 97.98 R1: 99.02

S2: 97.80 R2: 99.12

S3: 97.45 R3: 99.36

Technical Overview:

As support at 97.98 was firm yesterday, we are still looking for one last rally higher towards the 99.36 - 99.59 area, where red wave 5 and black wave 3 will ideally end and set the stage for black wave 4 down to 97.80.

Since the 99.12, the technical picture has been rather messy and hard to read, but that is very common in fourth waves. If we look at Elliott Alternation principle, it says that we should expect wave two and wave four to be of different character. Looking at the chart above we can see that red wave 2 was relatively simple but deep in correction, which is why we should expect a shallow and complex red wave 4, which is exactly what we have gotten.

If we then look at black wave 2, we can see the same picture. Black wave 2 was a simple deep correction and therefore we will expect a rather shallow and complex black wave 4 once it has to run it course.

Trading Recommendation:

As we regard the upside potential as limited at this point, we prefer to stay neutral. However, a short-term trade should be to buy EUR here with a 98.45 stop and take profit near the 99.36 - 99.56 zone.