USDJPY on the verge of another big move.
The chart below shows a rally in the YEN as meaning it takes less YEN to buy a USD. It shows the parallel between Yen buying strength and Gold buying strength. Gold and the JPY share a high positive correlation when it comes to their relationship to the USD. In fact, more so than any other major paper currency last we checked.
We wrote the following last week as one possible explanation of the high correlation between the YEN and Gold.
There are several potential reasons for the eerie parallel between JPY and Gold. One simple one is this. In Asia, the JPY is viewed as the most stable regional currency. The Yen is viewed as the USD of the far east. So when Chinese and other Asian players seek safety, they buy Gold and Yen as well as USD (especially) if the crisis is EU based. We feel as the Asian Cartel picks up more strength and the USD Petrodollar becomes less powerful, this JPY/ Gold positive correlation will strengthen more.
Read more from that post: Gold Ready to Rocket
Yen Poised to Weaken vs the USD?
Now it seems the YEN is poised for a big move; specifically a weakening vs the USD. The wave counts are calling for a possible numerical rally in the USD/JPY. It means the yen may now weaken vs.the USD. If that is true, then Gold longs should take note. Gold could pull back.
That said, nothing here suggests a Gold pullback is not a buy. Just that if the Yen chart rallies (weakens vs.the USD), one leg of Gold's rally table will be kicked out.
Gold Today:
Chart HERE
The Yen is oversold numerically at 109 (overly strong vs the USD). The call here is for a possible reversal which would mean a numerical rally in the Yen to potentially 136. This is a weakening vs.the USD. Remember our chart at top shows that a rally in the YEN means a lower numerical number. The charts to follow are inverted. The analysis below is solid. Our only caveat is that picking tops and bottoms with EW is not easy. Oversold can remain this way for some time. Got it?
- Soren k.
ELLIOT WAVE ANALYSIS
Via Bullwaves.org
USDJPY
My Bias: LONG Wave Structure: rally in wave [C] Long term wave count: wave [C] is underway, upside to above 136.00 Important risk events: JPY: Final GDP q/q. USD: Crude Oil Inventories.
The price declined again today as called for by last nights wave count. The target at 10940 was met, todays low so far reached 109.22. The declining trend channel suggests one more decline to meet the line once more. That could happen at about 108.70, at which point the price would be perilously close to the lower invalidation line at 108.127.
At the moment we have a significant bullish divergence evident in MACD on the 4hr chart. This is a setup very similar to early April which yielded a 600 point rally! The wave count is now calling for another significant rally in wave [iii] grey. And the price is sitting at a higher low with extreme oversold levels on display. We are on the verge of a big move here if the wave count proves correct.
For tomorrow, watch for signs of a turn up again. A break of resistance at 110.23 again will be the first sign that the rally has begun.
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GOLD
Let's take a look at Enda's Elliot Wave Update written last night. And it is still spot on
My Bias: Long towards 1550 Wave Structure: ZigZag correction to the upside. Long term wave count: Topping in wave (B) at 1550 Important risk events: USD: Crude Oil Inventories.
Today's further rally in GOLD has bolstered the idea that wave 'iii' brown is underway. I have altered the short term count to show today's high as the high of wave '1' pink.
Since calling the low in wave (ii) blue at 1214, the price is now up $80 dollars! [Edit - indeed, not an easy feat in EW] That's not a bad haul in itself, but I think its just the tip of the iceberg for whats to come here.
Now the price has reached the upper trendline of the rising trend channel, the price should begin to use that upper line as support rather that resistance. A minor correction in wave '2' pink i now called for, but the lows at 1277 should support the rally. A further break of today's high will signal wave '3' pink is underway.
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DOW JONES INDUSTRIALS
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My Bias: market topping process ongoing Wave Structure: Impulsive 5 wave structure, possibly topping in an all time high. Long term wave count: Topping in wave (5) Important risk events: USD: Crude Oil Inventories.
It looks like wave '2' blue could be complete at todays lows. The declines today look corrective and fit well with last nights wave count. The target for wave '2' was set at 21116, and the low of the day reached 21117! 21117 is also the Fibonacci 38.2% retracement level, so the chances of a new rally in wave '3' are quite good now.
The price has bounced in an impulsive fashion off that low, wave '3' may already be underway. For tomorrow, watch that low at 21117, it should hold from here. But any break will simply mean wave '2' is extending in a more complex wave form. A break of today's high at 21178 will add weight to the idea that wave '3' is underway.
GOLD
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My Bias: Long towards 1550 Wave Structure: ZigZag correction to the upside. Long term wave count: Topping in wave (B) at 1550 Important risk events: USD: Crude Oil Inventories.
Todays further rally in GOLD has bolstered the idea that wave 'iii' brown is underway. I have altered the short term count to show todays high as the high of wave '1' pink.
Since calling the low in wave (ii) blue at 1214, the price is now up $80 dollars! That's not a bad haul in itself, but I think its just the tip of the iceberg for whats to come here.
Now the price has reached the upper trendline of the rising trend channel, the price should begin to use that upper line as support rather that resistance. A minor correction in wave '2' pink i now called for, but the lows at 1277 should support the rally. A further break of today's high will signal wave '3' pink is underway.
Read more by Enda Glynn
Read more by Soren K.Group
