[personalization-condition 11695]
Less than two years ago, during the coronavirus market panic, GBPJPY fell to a multi-year low of 124.04. The last time the pair traded at such levels was in August, 2012, when the world was still recovering from the Financial Crisis.
The Covid-19 selloff didn’t last that long though. After plunging 10.9% in March 2020 alone, the pair is now up 26.6% from that bottom. Earning nearly 27% in under two years is a respectable feat even for a stock investor, not to mention a Forex trader.
However, especially in the FX market, trends usually don’t last very long. Can we expect the bulls to continue their crusade to the north or is it time for the bears to take the wheel? That’s the question we hope the Elliott Wave chart below will help us find the answer to.
The daily chart of GBPJPY reveals that the uptrend from 124.04 to 157.42 so far is a five-wave impulse. The pattern is labeled (1)-through-(5), where wave (2) is a running flat correction, while wave (4) – a triangle. The impulsive structure of wave (3) is also visible two degrees down.
If this count is correct, the pair is currently trading in the fifth and final wave of the pattern. Wave (5) looks capable of reaching and even slightly exceeding 160.00. Unfortunately for the buyers, a three-wave correction follows every impulse.
Once wave (5) is over, a notable decline back to ~145.00 should be expected. The negative outlook is supported by a MACD bearish divergence between waves (3) and (5). While it is too early to short GBPJPY, we think it is too late to buy, as well.
[personalization-condition 11695]
