Traders just whacked the carry trades and equity markets after the 2:00 p.m. ET hour sending EUR/JPY well through our minimum wave 3 target of 155.60. It appears that large scale wave 3 has room to move lower, so we must look to the sub-divisions on the lower time frames to find out exactly how much room is left.

As I mentioned, we were very focused on the 155.50-70 zone in the last 24 hours. And watching price action today while I was long a small position from 155.50, I had a strong feeling that a large part of the market was also watching the same level. I escaped with a minor profit before it blasted to new lows. But there have been many cases in the past like this when I can tell the market was counting on a specific level to serve as either support or resistance. And when it fails after the market gave that particular level a brief nod by putting in a minor bounce or just simply consolidating, that level will flip to be technically significant in the opposite direction. In today's example, we would expect 155.50-60 to serve as resistance.

Now it just so happens that 155.60 lines up with actual technical resistance, which strengthens our conviction in the level. For tonight, I am offered at 155.65 with stops around 156.05. For the downside target, the minimum projection of the shown wave III is 154.67. I will be looking to book everything here as 154.70 is significant support on the higher time frames. In other words, I am expecting waves I and III to be roughly equal in this case.



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

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