As we await the release of this week's economic data, we're going to concentrate on a rather significant technical development in EUR/JPY. The move up from early March began the current major 5th wave that has, as it should, sub-divided into 5 waves. Currently, that 5th wave of the 5-wave subdivision is forming a bearish completion pattern called an ending diagonal.

In a normal 5-wave trending sequence, wave 4 will never enter the territory of wave 1. But an ending diagonal in the 5th wave position is an exception and does allow for this. I have drawn a simplified version of an ending diagonal on the chart below for further clarity. Once the trendline connecting the lows of waves 2 and 4 is broken, panic selling should follow.

Further, my proffered Elliott Wave count has 170.00-area as the end of wave 5 of 5 of “V”, or in other words, wave 5 of 3 different degrees will complete here.

Lastly, the RSI has been negatively diverging since last month, which indicates current momentum levels area lesser compared to those seen in the March-May move higher.



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

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The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.