USD/JPY's hands are tied as EUR/USD and EUR/JPY are running the show this morning. The London wave of Euro selling sent EUR/USD lower from a Head and Shoulders pattern and through the significant 1.2990 shoulder line support level. The intensity of the selling felt like a wave 3 of wave scenario, which invites more selling on a meaningful retracement.

I am looking for a move back into 1.2975-95 for a retest of shoulder line support to complete wave iv of 3 before the sellers re-emerge. There is a possible symmetrical retracement setting up between waves 2 and iv. Considering that minor wave ii was very tight and to the point, you can expect wave iv to be long and drawn out. Should this be the case, a 48-point projection puts us right into a retest of the shoulder line support in the 1.2990 area. And according to Elliott Wave Theory, this is an acceptable retracement because iv does not venture into wave ii territory. I am currently offering my position in thirds at 1.2975, 1.2985, and 1.2995 with stops at 1.3005. Trendline support shown on the bottom side contained price once already, so I will be looking to book partial profits on a retest and pull the stop down to cost.



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

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