Late day developments made me consider the possibility that I am being a bit too selective in this market. The Dow rallied fairly well into the close today bringing both USD/JPY and EUR/JPY up through intra-day price resistance. It appears the Dow wants to check in with 13,300 before we retest the lows, so searching for USD/JPY and EUR/JPY intra-day long setups while this plays out is not unjustified.

I watched USD/JPY hold below 114.50 resistance two times today sending price to a 114.10-area low. After the day's low had been laid down there, I was watching for a potential short-squeeze on the third attempt up and through 114.50, and we sure got it. So tonight, any pullback towards 114.50 should be considered support.

When we surf the Elliott Waves, we see today's move up from 114.10 low through the 114.50 former resistance can be easily counted in 5-waves. And after you see 5-wave advances, you expect 3-wave declines that retrace a percentage of the 5-wave advance, according to basic Elliott Wave Theory. Now, if you read what I wrote this morning you will know that we are in a corrective bull phase on the daily charts. So, in other words, the daily trend is up until we get to 117.00. So if the trend is up, you expect the waves traveling with the direction of the trend to subdivide into 5's, and the corrective waves forming against the trend to subdivide into 3's. This afternoon's 5-wave advance from the lows is in agreement with our analysis.

So far, the first and second waves of the 3-wave sequence has unfolded. The third and final wave is scheduled to complete at a similar length of wave A, and the 50% retracement of this afternoon's 5-wave up. Our buy zone comes in at 114.65 and stops should be just below .786 retracement at 114.35. If filled on our buy limits, I will trail the stop to cost if 115.00 deals.



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

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