In summer 2004 an attempt was made to specify the final point of uptrend completion of EURJPY (refer to
20-figure possible trade) and GBP/JPY (refer to
Another 25+figures are possible).
Within almost two years the price reached the second project target, specified in the articles mentioned above. But wave picture has changed since that time. In this article projected targets of the specified cross-rates are adjusted.
I. EUR/JPY
Figure 1. Wave counting on monthly chart.
Global uptrend of EURJPY is supposed to be assuming the shape of the
impulse which fourth wave
(4) has formed in the shape of the
running triple zigzag (refer to
New Wave Pattern and New Classification of Extended Corrections in the FOREX Market) and which final wave
(5) is assuming the shape of the
impulse.
In case the supposition is correct, length of wave
(5) may be equal to hight H rtz of the running pattern, that is global impulse completion may be expected at
148 near strong resistance level.
Figure 2. Wave counting on weekly chart.
Undoubtedly the set of corrective threes once supposed wave
(3) is completed makes it possible to present further upward movement in the shape of the
diagonal triangle. But diagonal triangles do not complete with the impulse. I believe that the final movement (wave
(5)) is a forming impulse. Let's analyze it.
Figure 3. Wave counting on daily chart.
Wave
(5) is supposed to be a regular impulse:
- the movement is within the channel.
- waves 2 and 4 of impulse alternate in terms of the correction depth.
- depth of waves 2 and 4 corrections approximately corresponds to Fibo levels.
- fourth wave 4 is forming in the shape of horizontal triangle, typical of impulse fourth waves.
- third wave 3 is ~1.618 times longer than wave 1.
- wave 1 height approximately corresponds to the widest part of the triangle (wave 4), that is why wave 5 length may be expected to be equal or proportional to first wave 1.
There are two strong resistance levels (
144 and
148) above wave
3 of (5) ending, they may become the final obstacle for the uptrend. In this case wave
5 may correspond either to 62% of the triangle hight or to Robert Miner's 127% external retracement (127% of the triangle hight).
II. GBP/JPY
Figure 4. Wave counting on monthly chart.
Global
horizontal triangle is supposed to be forming. From the second half of 2000 upward movement is wave
[C] of this triangle and it is in the shape of the
double zigzag. There is quite strong resistance at
219, above the current prices and this zigzag may complete there (~ 78% of the previous wave).
Figure 5. Wave counting on weekly chart.
The second leg of final zigzag
(Y) is supposed to be a
diagonal triangle. In case zigzag
(Y) legs are equal its completion may be expected around
218, not far from the mentioned resistance level. Let's analyze it.
Figure 6. Wave counting on daily chart.
Wave
[iv] forming is supposed to be completed in the shape of the
horizontal triangle. In case the supposition is correct length of final wave
[v] may be equal to the widest part of the triangle whereas diagonal triangle ending may be expected at
213 resistance.
In case waves
[i] and
[v] are equal price may reach
219 level, that corresponds to the significant resistance level and Robert Miner's 162% external retracement (162% of the widest part of the triangle).
III. Japanese triangles
In Figures 3 and 6 (above) it can be clearly seen that from December 2005 practically simultaneous horizontal triangle has been forming. It is quite logical as JPY, as a constituent of either of the cross-rates, has already formed a similar pattern.
Figure 7. Wave counting on daily chart.
Refer to Figure 7 for wave counting of USDJPY. This impulse with wave
4 in the shape of the horizontal triangle was described in details in
Project Targets for 2006-2007, USDJPY (Wave Analysis). This very triangle may play first fiddle for triangles in EURJPY and GBPJPY charts.
Cross-rates constituents impact on the currency pair (EURJPY, for example) movement is shown below in Figure 8. Constituents are EURUSD and USDJPY. By means of simple algebraic transformations it can be proved that
EUR/USD * USD/JPY = EUR/JPY
Of course
EURJPY is an independent market not multiplication of EURUSD and USDJPY currency pairs. But due to the peculiarities of price formation in the FOREX market the result is accurate to several pips at almost any moment of time.
Figure 8. Weekly charts of EURJPY and its constituents.
In case the constituents move in different directions final movement of EURJPY is either almost horizontal (part 2a, figure 8) or slanted in the direction of that constituent which rate of change is higher (that is the chart which has bigger slant). For example, in part I USDJPY is rising quicker than EURUSD is dropping. In part II EURUSD is rising quicker than USDJPY is falling. As the result, EURJPY is in a steady uptrend in part I and part II.
Impact of the constituent prices rate of change on the cross-rate movement can be clearly seen in parts III and IV. Constituents movement is not unidirectional but the
direction of the movement is the same, whereas the cross-rate changes the direction of its movement abruptly as
price movement rate of its constituents in parts III and IV differs.
Since from December 2005 EURUSD and GBPUSD are not in unidirectional motion whereas JPY has formed horizontal triangle, it is quite logical that EURJPY and GBPJPY repeated the most widely spread extended correction,
horizontal triangle.
IV. The area of acceptable and possible values of trend completion
To specify the area of acceptable and possible values of the reversal point for EURJPY and GBPJPY and their constituents EURUSD, GBPUSD and USDJPY numeric data on the charts of this article and Monthly Wave Analysis (March) (refer to
Monthly Wave Analysis, March, 2006) are used.
EUR/USD
Price fall to 1.1824 is enough to confirm the alternate variant.
Price decline to 1.1641 is enough to confirm the main variant.
In case legs correlation of the final zigzag is 1:1.618, price will drop to 1.14.
Significant resistance levels – 1.18, 1.16, 1.14.
GBP/USD
Price fall to 1.7332 is enough to confirm the alternate variant.
Price decline to 1.7047 is enough to confirm the main variant.
In case legs correlation of the final zigzag is 1:1.618, price will drop to 1.66.
Significant resistance levels – 1.73, 1.70, 1.66.
JPY/USD
Price rise to 121.36 is enough to confirm the main variant.
Significant resistance levels – 122, 126.
EUR/JPY
Price rise to 143.59 is enough to confirm the main variant.
Significant resistance levels – 144, 148.
GBP/JPY
Price rise to 212.99 is enough to confirm the main variant.
Significant resistance levels – 213, 219.
These restrictions and preferences are shown in the chart (refer to Figures 9 and 10 below).
Figure 9. The area of acceptable and possible values of the trend completion point for EURUSD, USDJPY, EURJPY.
Figure 10. The area of acceptable and possible values of the trend completion point for GBPUSD, USDJPY, GBPJPY.
Filled areas are the total of acceptable and most probable values of trend completion for these currency pairs on basis of the current wave counting.
Thus, from Figures 9 and 10 it can be clearly seen that on the basis of current wave counting possible values of the trend completion points for EURJPY and GBPJPY and their constituents EURUSD, GBPUSD, USDJPY
do not contradict each other and can be reached in the nearest future.
Note
This report is subject to change and reveals the analyst opinion of the situation at the moment of its release.
Reference
Dmitry Voznuy
forDmitry@yahoo.com
March 29, 2006
The ideas given above are purely informational purpose only. This report was translated by Natalya.
Do not reproduce without explicit permission of Alpari.
