Today, on October 31, 2014, the Central Bank of Japan announced that it will expand its stimulus program in order to prevent deflation. After the announcement the other currencies rose sharply against the Japanese Yen. Most people would say that BoJ’s decision was the reason for this. That is why they have been waiting for it in order to make their trading decision.
On October 29, 2014, two days before the Bank of Japan announcement, we published an article, called “GBPJPY performing nicely”, saying that “the uptrend still has room to grow”. But our opinion had nothing to do with Japan’s asset purchasing program or any other piece of news. As always, it was motivated only by the Elliott Wave Principle. The chart below shows how GBPJPY looked like on Wednesday.
As visible, we assumed that the chart shows two degrees of impulsive waves. This brought us to the conclusion that another rally for wave 3 of (3/C) is highly probable. On the next chart you will see what GBPJPY did after Wednesday’s forecast.
“Japan’s central bank expanded its asset purchases in a surprise move Friday to shore up sagging growth in the world’s No. 3 economy.” – ABC News
To the majority of traders and investors the keyword in this excerpt is “surprise”. They see the yen’s sell-off as a result of BoJ’s surprising move. To Elliott Wave analysts there is nothing to be surprised by, because we know that the engine of market price action is not the news, but market psychology, which is not random or chaotic, but patterned. This situation provides a good example of the Wave Principle’s ability to prepare you for future developments long before their “cause” is known to the public. In this case, we were two days ahead of the news.
