AUDJPY declined in five waves from 105.40 in April 2013 to as low as 86.30 four months later, but has been recovering ever since. Last week the pair went close to 103, but the bulls did not show enough persistence, which led to a sell-off below the 100.00 mark as of today. As always, what interests us is the wave structure of the price movement, visible on the charts.
The daily chart shows a complete 5-3 Elliott Wave cycle, which means the larger trend points to the downside and everything after the bottom of 86.30 is just a correction. To be more precise, it looks like an A-B-C simple zig-zag with a leading diagonal in wave A. Despite making a very deep retracement, the exchange rate did not reach the invalidation level of 105.40. As long as this figure stays untouched, the above-shown bearish scenario remains valid. Now let’s see if AUDJPY has really finished its wave C.
In theory, wave C is supposed to be a five-wave impulse. According to the 4-hour chart, it is. Furthermore, the latest decline that started from 102.84 also consists of five waves, thus confirming the reversal we are witnessing. In conclusion, if this is the correct count, 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.
