We were watching the 105.00 resistance level in USD/JPY this afternoon. The market tested it about five times before finally selling off into the close today to a 104.60-area low as we trade 104.78. If you are short, I would strongly recommend trailing a stop to cost and, or booking a majority of your profits. The dollar just acted "too strong" today following the commodity sell off for me to remain bearish US dollar tonight. Oil did hold the $135 support level, but the bounce has been less than impressive and the 240-minute gold chart looks like a short-term blow off top.

Down to 20-minute chart, we see some early evidence of a possible change in trend. I've been talking about Elliott Wave at its simplest levels for over three years now. Elliott in its simplest form is trends advance in waves of five and corrections retrace the trends in waves of three. And for the first time in weeks, we have a 5-wave EUR/USD trend that is trending lower . Does this mean we have seen the top in EUR/USD? Most likely not. But it does have implications for lower prices in the short run. So if we are in corrective mode and we have an wave-A that unfolded in 5-waves, we are most likely trading in a zig-zag that sports a 5-3-5 wave count. So 5-down is complete, which means we are expecting a 3-wave correction before a final 5-wave decline unfolds targeting 1.5850.

For tonight, I would like to see a 3-wave rally into the backside of broken trendline support at the .618 retracement at 1.5970. I will look to get short with stops above 1.6010. Once I have 40 points of unrealized profit here, I will begin scaling out of lots and trailing a stop behind me. I will be very protective of this position because it is so highly contra-trend. But I will try to hold a small bit of the position for the move down to 1.5850.



Todd Gordon is a Technical Currency Strategist and Fund Trader with GAIN Capital Group.

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The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.