EURUSD, EURJPY, USDJPY: Saturday 5th October 2013

Something a little different from me this weekend. If you were after a fix of analysis mania, I am having the weekend off and in fact am not going to look my usual charts next week at all. The reason? Well, they work fine and I have been trading very profitably but a few key elements seem to universally apply and it is those that I am focusing on this week. Firstly, the daily & monthly pivots and an appropriate non-lagging moving average of those pivots. Secondly, a price envelope based on those moving averages suitably back-tested for boundary efficacy. Thirdly, a suitable momentum study. These have been selected for their clinical affects at decision points when combined with the opening range work that I have been doing. I'll try to explain with each chart below.

EURUSD
Big Picture:

Facts: The Moving average of the rolling monthly median of the high and low price is green for buy and pointing uphill. Price is either in a 'c' of 'C' or a wave 2, so although the momentum study appears overbought, it is within the context of this wave formation. As such, as price is not near the top of its long term price envelope, benefit of the doubt is given to the bullish trend transitioning into a 'thrust' up, until otherwise proven different. For now, that would be a breach of the resistance trend line in dashed purple and the daily picture below.

Intermediate Picture:

Facts: The Moving Average is green for buy and pointing uphill. The Momentum Study is oversold but price is nowhere near the top of the Price Envelope and in fact is in prime location,or positioning itself, for a thrust up to the top. The price action prior to this pull back has maneuvered price from the top of the channel to this position with little price decay at all.  
Decision: buy an opening range (Asian, London or US) break to the upside once price is above Monday's Daily Pivot and /or above the purple resistance line shown for confirmation. This trade will not be taken below the Daily Pivot or will be invalid if the Moving average turns red. This is a 60min chart, so ensure trades only taken after the Opening Ranges computed to ensure studies hold (GMT: 11.00-11.06pm, 8.00-8.06am, 1.00-1.06pm inclusive Highest and lowest price)

USDJPY
Big Picture:

Facts: The Moving average of the rolling monthly median of the high and low price is green for buy, but flat as price action has been in a medium term correction following a severe thrust to the upside. As the daily momentum study is oversold having completed a 3 wave formation so far and price has been hammering the 96.51 envelope line to no bearish avail, I have tentatively drawn in a lower support line with the presumption that any upside target would initially be the upper resistance line. I do not believe we have a completed bullish triangle or that we are necessarily in a triangle at all. I could easily see a 'c' wave up to complete a 'b' wave of a flat correction, which would then fall in a 'c' wave to the 38.2% zone, as did the first strike down from the top. Obviously, we could also have a 'b' wave triangle forming if price stopped at the upper trend line there and then fell. No matter, my current thoughts are that an upward tendency is to be supported.

Intermediate Picture:

 Facts: The Moving Average is for red for sell and pointing downhill. However the Momentum Study has been in positive divergence during what looks like a contracting diagonal and price has broken out of that formation to the upside. This appears to support the tentative lower trend line drawn in the above bigger picture. Although it is addictive to want to catch an early thrust, I am waiting until the return leg to buy a green moving average and oversold momentum study before committing fully, especially in light of the ambiguous or incomplete corrective formation in the bigger picture.

Decision: No trade recommended, although I may regret that if it spikes and corrects sidewards!! However, the bullish tendency is of course there, which combined with the EURUSD buy recommendation, suggests that EURJPY should be showing bullish tendencies too.

EURJPY
Big Picture:

Facts: The Moving average of the rolling monthly median of the high and low price is green for buy, and pointing uphill. However, following a severe thrust to the upside as in the USDJPY, the oversold momentum study has been working off its overbought formation by actually correcting uphill. I assume this is a nod in the EURUSD direction, as of course we have seen USDJPY move sidewards during its own corrective phase thus far. There is ambiguity on what we have seen though, in that unlike USDJPY, there is a perfectly acceptable sidewards triangle formation on show but the lack of any thrust up so far, has the 'wedge' pattern taking centre stage. I think this could actually be a 'b' wave diagonal, to marry up with my thesis on USDJPY being a 'b' leg sidewards triangle, but nevertheless, uphill seems to be the order of the day for now and there is a hell of a lot of room in the envelope for bull moves to grow, whatever the outcome.

Intermediate Picture:

Facts: The Moving Average is red for sell and pointing downhill. However, given the bullish storyboard in the bigger picture, combined with the EURUSD & USDJPY summaries, the oversold Momentum Study is compelling. This does look like a corrective pull back into the trend and with the '5' waves up and '3' down are taking into account as the last two waves in this chart, the turn up may have already begun. There is plenty of room in the price envelope for a move to 135/136 to take us to the top of the wedge at least.

Decision: Buy an opening range (Asian, London or US) break to the upside once price is above Monday's Daily Pivot and /or above the purple resistance lines shown for confirmation. This trade will not be taken below the Daily Pivot. This is a 60min chart, so ensure trades only taken after the Opening Ranges computed to ensure studies hold (GMT: 11.00-11.06pm, 8.00-8.06am, 1.00-1.06pm inclusive Highest and lowest price)