It has been more than four months since we published “AUDJPY: Support Becomes Resistance”. On May 1st, 2015, when AUDJPY was trading near the 94.00 mark, the Elliott Wave Principle made us believe “we should prepare for much lower levels in AUDJPY from now on”. The chart below was the one and only reason we needed to become extremely bearish.
As visible, we combined the wave structure of the price action with some trend lines. Both methods suggested AUDJPY was going to fall. The five-wave impulse from 102.80 to 89.30 was pointing south, while the corresponding three-wave recovery in wave 2 was going to encounter the resistance of the previously-broken trend line. If you have not been following AUDJPY, the next chart shows how thing went.
The pair continued higher for a while and reached 97.30. Nevertheless, the invalidation level for this count at 102.80 was never threatened, so the bearish idea was still alive. As soon as wave 2 ended, the exchange rate started declining. On August 24th, the “Black Monday”, AUDJPY plunged as low as 82.06. Another great call we should thank the Wave principle for. From now on, the downtrend is likely to continue. It appears AUDJPY is in its third wave down now.
