EUR/JPY has broken back below support at 121.55 indicating that our short-term count was of track and we have reviewed our count from the September low at 115.83. The previous count showing a series of waves ones and twos is no longer the best fit. Instead a leading diagonal seems to be the best count, but this also means that wave 1 completed with the test of 122.66 and a correction of wave 1 now is unfolding as wave 2. The ideal target for this corrective decline is seen at the 50% corrective target at 119.26 which also marks the low of wave iv. So more downside pressure should be expected in the days to come as wave 2 continues lower to 119.26.

Short-term resistance is seen in the 121.18 - 121.36 area, which is expected to cap the upside for more downside pressure towards 120.37 and then 119.26.

R3: 121.69

R2: 121.36

R1: 121.18

Pivot: 120.87

S1: 120.37

S2: 119.88

S3: 119.26

Trading recommendation:

We took profit on our EUR long position from 120.25 at 121.40 booking a nice 115 pips profit even though our count proved incorrect. We will sell EUR at 121.20 with a 122.20 stop and take profit at 119.50.