close icon

Crude Oil and USDJPY Ruled by One Pattern

Everything was going so well for USDJPY and crude oil bulls until last week, when both the exchange rate and the WTI crude price made sharp bearish reversals. Oil fell from as high as $72.88 to $67.40 a barrel, while USDJPY plunged from 111.40 to 108.95. Normally, the media tried to explain the selloffs with different external factors such as Vladimir Putin saying that $60 a barrel oil suits Russia. USDJPY’s decline, on the other hand, is supposed to be the result of dovish Fed minutes in addition to rising geopolitical tensions.

Elliott Wave analysts, however, prefer not to waste energy on after-the-fact explanations. Instead, we focus on the Elliott Wave patterns that cause the market moves the news would later explain. Here, we think one such pattern is the reason USDJPY and crude oil fell last week. Take a look at it below.
usdjpy elliott wave reversal
The pattern in question is called an “impulse“. Impulses are five-wave structures, which the Wave principle states are always followed by a correction in the opposite direction. In USDJPY’s case, there was a textbook five-wave impulse to the upside from 104.64, so it made sense to expect the bears to return soon, especially since the RSI indicator was also supporting the negative outlook by showing a bearish divergence between waves iii) and v). Crude oil is a completely different instrument in an entirely different market. Nevertheless, the same logic was applied.
crude oil elliott wave reversal
Crude oil’s rally from $58.10 also took the shape of a five-wave impulse pattern, despite the fact that it did not look exactly the same as USDJPY’s. In fact, it was quite ugly, but still carried the same meanings – that a bearish reversal should follow. The RSI depicted a divergence here, as well. So instead of joining the bulls in USDJPY on May 21st or buying WTI crude oil on May 23rd, we thought staying aside was a better idea. The updated charts below show what happened next.
usdjpy elliott wave reversal update
USDJPY did not go down right away. The pair climbed to a news high of 111.40, but the bulls’ happiness was short-lived as the bears returned with a vengeance and erased 245 pips by Thursday. Crude oil’s crash was hardly a surprise either, despite the completely different geopolitical motives behind it.
crude oil elliott wave reversal update
It turned out oil’s top was already in place at $72.88. The following slump to $67.40 so far was not the result of Vladimir Putin’s comments, but of the complete impulse pattern which preceded them. In a sense, there stage was already set for a bearish reversal and only needed a catalyst.

USDJPY and crude oil demonstrated something Ralph Nelson Elliott discovered in the 1930s – that “the habit of the market is to anticipate, not to follow.” So the next time you start to obsess over what will Donald Trump, Kim Jong-un or Vladimir Putin say or do next, do not forget to take a look at the charts. They might hold the answers already.

Stay informed with our newsletter

Latest Elliott Wave analysis on different topics delivered to you weekly.

Privacy policy
You may also like:

Crude Oil: How Elliott Wave Deals with Uncertainty

On October 3rd, the price of WTI crude oil was up 27.9% year-to-date, corresponding to a rally from $60.09 to $76.88 a barrel in a little over nine months. Unfortunately for the bulls, no trend lasts forever and the rest of October confirmed that fact. Crude oil prices plunged to $64.83 yesterday, erasing almost 72%…

Read More »

WTI Crude Oil and the Case Against Top/Bottom Picking

Traders often think they have to catch each and every move in its entirety, in order to be successful. The sad truth is that is impossible and trying to achieve it can easily backfire and lead to more losses instead of bigger profits. Whether you trade Forex, WTI crude oil or stocks, nobody can catch…

Read More »

Crude Oil Bears Betrayed By a Trend Line

It was a good week for the crude oil market, which has been under pressure for over a month. WTI climbed to as high as $75.24 on July 3rd, but the bulls could not keep the positive momentum, which led to a decline to as low as $64.40 by August 15th. And just when it…

Read More »

WTI Crude Oil ‘s Flirt with $66 Was No Coincidence

WTI crude oil set an upbeat mood at the start of last week and managed to lift the price to $69.89 on Monday, August 6th. They could not keep the positive momentum for very long though, as the price quickly reversed to the south again. By Friday, August 10th, the bears had already dragged WTI…

Read More »

Crude Oil Even Weaker than Expected

WTI crude oil bulls looked very confident at the start of the week, when they lifted the price to $70.41 a barrel on Monday, July 30th. Unfortunately, their enthusiasm quickly faded, allowing the bears to cause a selloff to $67.34 as of Wednesday, August 1st. One of the possible “reasons” for the decline was the…

Read More »

“Black Swan” Pattern Sends Crude Oil Plunging

Crude oil bulls gave their best to reach a new high last week. Alas, $74.67 was all they were capable of before running out of momentum. The following sharp plunge dragged the price of WTI crude oil to an intraday low of $69.21 on Thursday for a 7.3% weekly loss. Among the “fundamental” factors the…

Read More »

OPEC Boosts, Oil Surges, Elliott Wave Explains

Correct us if we are wrong, but shouldn’t a supply increase lead to lower prices? Well, at least that was the cause and effect relationship OPEC has been relying on when they decided to increase oil production at a meeting in Vienna on Friday, June 22nd. In an attempt to put the recent oil price…

Read More »

More analyses