EUR/JPY Shows Large Top/Reversal

The market indeed continued its extended period of ranging higher, still seen forming a large rising wedge since May. These are generally viewed as reversal patterns, and with an eventual (and likely sharp) downside resolution of the base (currently at 131.25/40) favored. But as been warning over the last few weeks, a final upleg back to the Sept high at 134.95 and even the ceiling of the pattern just above (currently at 135.25/40) is likely first (see in red on daily chart below). Nearby support is seen at the bullish trendline from Oct 8 (currently at 133.45/60).

Strategy/Position
Unfortunately just missed the buy target from the Oct-11 email at 132.35/50 (reached 132.60 on Oct 15), and before resuming the upmove. At this point, with at least some further gains still favored, would just buy here (currently at 134.25). But with those gains potentially limited, would use a very aggressive stop on a close below the bullish trendline from Oct 8 (cur at 133.45/60 and rising rapidly) to compensate, and maintain a good overall risk/reward in the position.

Long-Term Outlook
As discussed above, the market is seen in process of a potentially more important topping pattern over the last few months (rising wedge, see weekly chart/2nd chart below). Note too that long term technicals remain weak (see deterioration and sell mode on the weekly macd at bottom of weekly chart/2nd chart below), the market has been struggling at marginal new highs over the last few months, and there has not been a substantial pullback/ correction in the huge surge from the July 2012 low at 94.15 (have been relatively short-lived and shallow, weaker longs never "washed out"), with all adding to the view that a more important top may be nearing (at least 6-9 months). Additionally, lots of longer term resistance lies just above the ceiling of the wedge in the whole 139.25/140.50 area (June 2009 high, 62% retracement from the Jul 2008 high at 170.00, and the ceiling of the bull channel from Feb). Longer term support below the base of the wedge is seen at 124.85/00 (June low, start of the pattern).

Strategy/Position
Bullish bias that was put in place on Sept 11 at 133.00 remains. But with risk of a more important top (and sharp reversal) rising, will be looking for signs of such a high on approach of the ceiling to switch out (and even reverse).
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