Last week, the USDJPY pair opened at 102.02 and undertook an impressive rally to 104.31, before settling at 104.01 for the weekend. After such an impressive bullish run, it is quite normal to expect that the uptrend is going to continue. But since Monday, September 5th, USDJPY has been nothing more than a disappointment. The pair erased all of last week’s gains and is currently trading around 101.60. Was there a way to see that violent reversal coming? How?
The chart below was sent to our premium clients before the markets opened this Monday.(some of the marks have been removed for this article)
There are probably more than just one single way to predict a reversal in the FOREX market. Ours is called Elliott Wave analysis. By applying the Wave Principle’s rules and guidelines to the 4-hour chart of USDJPY, we came up with a count, suggesting the rate is likely to head south this week. First, there was the wave count itself and second – the 61.8% Fibonacci level – which was supposed to act as resistance. So, all we needed to form our negative outlook was the chart you see above. As it turns out, it was just enough.
By falling by nearly 290 pips in just three trading days, USDJPY gave us another great example of the Wave Principle’s forecasting abilities. If you rely on external factors like news and events, in order to predict the market’s behavior, you could always find reasons for both a rally and a decline in the same time. Elliott Wave analysis, on the other hand, does not need such external reasons. All it cares about is the patterns on a chart, in order to help traders accurately determine the market’s next move. And that is all a trader really needs, isn’t it?
What to expect from now on? What is the bigger picture saying? Is USDJPY going to continue even lower or the support near 101.20 would turn out to be too strong for the bears to breach? Prepare yourself for whatever is coming. Order your Elliott Wave analysis due out every Monday at our Premium Forecasts section. Stay ahead of the news in any market with the Elliott Wave principle.