Whether it is because of Brexit or not, GBPJPY has been trading below 160.00 ever since the referendum in June 2016. The pair has been locked in a wide range between 156 and 124 for four years now. Last week, it closed the session at 134.66, down from 138.84 at the open.
In order to put things in Elliott Wave perspective, we need to examine GBPJPY ‘s behavior since the top at 195.89 in June 2015. The daily chart below allows us to do that.

The first thing to notice is that the decline to 124.69 by October 2016 is a five-wave impulse. The pattern, marked as wave (A), is labeled 1-2-3-4-5, where the five sub-waves of the third wave are visible, as well. It was followed by a simple A-B-C zigzag in wave (B), where wave C was an ending diagonal.
GBPJPY Helps the Market Reveal its Fractal Nature
This means the choppy and overlapping decline which has been in progress since the end of wave (B) at 156.61 must be wave (C). It is hard to imagine how wave (C) is going to evolve into an impulse from here. It makes a lot more sense to expect an ending diagonal to emerge.
With that in mind, it appears wave 5 of (C) has just begun. It should be able to breach the low of wave 3, which means targets in the 120.00-122.00 area are plausible. Once there, however, the entire (A)-(B)-(C) since the top in June 2015 would be complete. A swift and sharp bullish reversal should then be anticipated in GBPJPY.
The formation of an ending diagonal in wave (C) would reveal in a beautiful way the fractal nature of the markets. It would mean the entire (A)-(B)-(C) structure is the same as the A-B-C zigzag in wave (B), only bigger and inverted. Let’s see…
What will EURUSD, USDJPY and USDCAD bring next week? That is the subject of discussion in our next premium analyses due out late Sunday!