Morgan Stanley (NYSE:MS) picks EUR/JPY as its technical FX chart of the week, where MS is bearish and looking to sell the pair on rebounds. MS provides the important levels where traders should consider adopting such a bearish strategy, and placing their targets accordingly.
On the 10-Year EUR/JPY Chart:
"We believe EUR/JPY traded a major top at the 149.78 level at the end of last year, completing a major b wave rally. This implies that a major C wave decline is now developing. Still within the early stages of this C wave decline, EUR/JPY is starting to develop a series of impulsive bearish structures. This is consistent with a sustained decline over the longer term," MS argues.
On the 2-Year EUR/JPY Chart:
"Indeed, the substructure from the 149.78 peak has completed the 1st wave lower, followed by a second wave correction. EUR/JPY is now entering a 3rd wave decline, we believe, of the anticipated 5-wave structured C wave down. This is usually the sharpest part of the structure and often provides attractive risk/reward for positioning. Hence, our bearish EUR/JPY strategy recommendation this week," MS advises.
On the 90-Day EUR/JPY Chart:
"The recent up trendline support has been broken, triggering a fresh bearish signal. We now expect a decline towards the 133.31 July low, which represents the 1 st wave bottom within the broader 3rd wave decline. A further move below here would confirm the bearish structure opening the way for a decline through 130.00 towards 126.10 initially," MS projects.
