GBPJPY bottomed in the beginning of October 2011 and has been in a strong uptrend ever since. The Elliott Wave Principle has taught us never to rely only on the trend, but to look into its structure, in order to determine in which phase it is now and what is left from it. So starting from the weekly chart of GBPJPY, we see that this rise is part of a larger expanding flat correction, which is retracing a five wave decline from 251.40 to 118.70.
When the correction ends, another impulsive fall has to be expected. The question seems to be “have the bulls any power left to push prices higher, before bears take control again?” At first glance we can not answer, so closer look is needed. On the chart below we will go deeper into the white rectangle.
On the 4-hour chart there are two three-wave sequences so far, which comes to tell us that some kind of a corrective pattern is developing. After every correction, the larger trend resumes. However, this looks like an unfinished pattern. It could be a flat, a triangle or even a double zig-zag. Trying to guess which one will it be is pointless now. All we care about is the immediate progress of GBPJPY. On the 1-hour chart below the internal structure of wave 1/a is visible.
Wave 1/a consists of five waves, telling us that when wave 2/b is completed, more weakness should come. Prices could fall in wave 3 or in wave C. From a trader’s perspective it does not matter how we label it now. In conclusion: shorting GBPJPY may be profitable in the near term, but in the long one, bulls are still in charge and before they surrender, figures around 180 could be reached.