EUR/JPY disappointingly moved back below support at 129.68, which has forced us to review the short-term count for the rally from the 124.59 low. This review leaves us with two possible scenarios.

1: We have seen wave i rally from 124.59 to 130.27 and wave ii was a simple deep correction to 126.61, that corrected 61.8% of wave i. The rally that followed wave ii from 126.61 to 131.99 is counted as wave i/ of one lesser degree and the ongoing decline is counted as wave ii/, which now is re-testing the 50 - 61.8% corrective target-area between 128.66 - 129.30. This count is slightly preferred, but only just.

2: The second count shows that wave i rallied from 124.59 to 130.27 and everything since the 130.27 is part of an expanded flat wave ii. If this count is correct, the support at 128.66 will be broken for a dip to 126.01 to complete wave ii and set the stage for a strong extended rally in wave iii.

We slightly prefer the first scenario, but it needs to prove itself.

R3: 131.15

R2: 130.53

R1: 130.32

Pivot: 129.62

S1: 129.30

S2: 129.09

S3: 128.66

Trading recommendation:

Our stop at 129.50 was hit for a 78 pips loss. We will buy EUR again at 128.95 and place our stop at 128.50.