Though we have been so focused on USD/JPY lately, the euro showed vulnerability against both the dollar and yen today. Both EUR/USD and EUR/JPY are flashing breakdown signs in here, which means we might need to put the USD/JPY aside for now as it works lower in a 4th-wave correction and focus on the euro pairs .

For tonight, I am going to position myself short EUR/JPY on a bounce into 165.10 and the .618 and .786 retracement at 165.22 and 165.38 as shown. Stops for anything short will be just above today's 165.58 high. The critical breakdown point will be the 164.65 trendline support. If that gives way, I will be looking for the area of the previous 4th wave at 164.20 to book profits on a majority of my position.

Though we are not directly focusing on USD/JPY tonight, if it does pullback to 117.00-116.80, as EUR/JPY is finding support -- any support - -I will be looking to establish longs on a compelling price formation for a partial position size. However, I believe USD/JPY might need to work itself out for a while before it gathers enough steam for the 118.00 move.



Todd Gordon is a Technical Currency Strategist and Fund Trader with GAIN Capital Group.

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