The EUR/JPY pair has extended the corrective decline in red wave ii to a low of 119.50. Our preferred count shows that a triple zig-zag is complete and a new impulsive rally could start anytime. In the short-term, a break above minor resistance at 119.84 and more importantly a break above resistance at 120.17 will confirm that red wave ii has completed and red wave iii towards 123.59 is developing.

We do not see anymore downside potential. If red wave ii is able to push all the outer limits, it still could drop a bit closer to 119.17. However, it looks quite unlikely.

So, look for a break above minor resistance at 119.84 as it is the most likely short-term outcome and the start of a new impulsive rally higher to 123.87.

R3: 120.64

R2: 120.16

S1: 119.84

Pivot: 119.69

S1: 119.55

S2: 119.39

S3: 119.17

Trading recommendation:

We are long EUR from 117.25 with our stop placed at 119.00. If you are not long EUR yet, then buy a break above 119.84 and use the same stop at 119.00