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:

Ahead of the 14% Crude Oil Dive with Elliott Wave

The crude oil market is capable of going from a state of oversupply to one of not enough supply in relatively short time. OPEC and Russia’s decisions and the fact that in a normal year the world consumes over 100 million barrels of oil daily cause the pendulum to swing from glut to deficit quite…

Read More »

Chevron Stock Doubled in a Year, Can Go Higher Still

A year ago it seemed like all hell was breaking loose on the oil industry. Even oil majors like Chevron couldn’t escape the carnage. First it was the pandemic, which forced governments to close businesses and restrict travel. Then, the Russia-Saudi Arabia oil price war worsened the situation as the two countries failed to negotiate…

Read More »

Crude Oil Reaches Bullish Target Amid New Lockdowns

COVID-19 returned with a new force in Europe after the warm summer months. Countries around the continent have entered new lockdowns in an attempt to curb the virus’ spread. The situation in the U.S. has never been worse with roughly 200 000 cases per day. But unlike during the first wave of measures, crude oil…

Read More »

Crude Oil – The Elliott Wave Reason for the Reversal

At the start of last week crude oil was trading at less than $36 a barrel. It was down from $43.84 in August and from $41.91 on October 20th. Fortunately, Elliott Wave analysis helped us prepare for this selloff in advance. So, when the weekly session began, the price of crude oil was down 14%…

Read More »

Crude Oil Bears Make the Most of Their Time to Shine

After the market broke during the pandemic panic and crude oil prices fell into negative territory, a quick and sharp surge followed. WTI climbed to $43.84 a barrel in late-August. But the crisis was far from over and the Elliott Wave principle helped us correctly predict the bearish reversal that came next. Now, crude oil…

Read More »

Crude Oil Gave Bulls a Clear Warning Before it Dropped

It’s been a bad couple of weeks for crude oil bulls. The price had been steadily climbing for months, up over 300% since late-April. In the last days of August, WTI crude oil reached almost $44 a barrel. By September 8th, however, the price was below $36.50. This 17% drop can be explained with the…

Read More »

Bullish Crude Oil Bet Pays Off Against All Odds

When it comes to the crude oil market, last month was one for the history books. The coronavirus pandemic forced the global economy to grind to a halt. This led to a sharp decline in oil consumption, while production was too slow to adapt. As a result, there was plenty of oil nobody wanted as…

Read More »

More analyses