“102.84 could turn out to be a major top, because AUDJPY may have just made the first step of a long journey to the south.” This is the final sentence of an article, called “AUDJPY: Is The Rally Over?”. It was published almost two months ago, on November 26th, 2014, when the AUDJPY exchange rate was trading in the zone of 100.00. The chart below shows how the pair looked like back then.
Our strongly bearish expectations were motivated only by the wave structure of the price action. The chart depicts a five-wave impulse to the downside, followed by a three-wave correction A-B-C in to the north. In terms of the Elliott Wave Principle, AUDJPY was supposed to go down. Two months later, the rate stands nearly 7 figures lower – at 93.30. But the forecasts suggests it is only halfway there, because the minimum targets lie below the bottom of 86.30. However, there is a strong trendline staying in AUDJPY’s path first.
As visible, the rising line, connecting the bottoms at 86.46, 88.23 and 91.76, has served as a support three times already. Despite that, we think the fourth one is likely to fail. Even though the bulls may be ready to battle, the bears should eventually prevail and break the trendline. This should open their way towards the levels beneath 86.00. The Wave Principle has helped us recognize an unreliable support many times. Could it do it again?
