close icon

Trade War Fears Shrugged Off by USDJPY

Less than a month ago, USDJPY was trading below 105.00 after plunging to 104.64. The media hurried to explain the dollar’s weakness against the Japanese yen with the looming trade war between the United States and China. Today, a trade war between the two largest economies is a near certainty, after China threatened to fight back and impose $50 billion worth of tariffs on 106 U.S. goods, including soybeans, aircraft and vehicles. Yet, USDJPY’s reaction to the trade war escalation is in the exact opposite direction this time with the pair climbing to 107.68 so far.

How come? If USDJPY initially fell when the U.S. imposed its first tariffs, why didn’t it accelerate to the south, when both countries threatened to go to a full-blown trade war? The logic behind USDJPY’s rally escapes us, too, but the Elliott Wave Principle comes to the rescue. A pattern hiding in plain sight on the chart below, sent to subscribers before the market opened on March 26th, holds the answer.
usdjpy elliott wave analysis march 26 trade war
Two patterns, actually. First, there was a five-wave impulse to the downside from 114.74 to 104.64. Two degrees of trend could also be recognized within wave 3). According to the theory, every impulse is followed by a three-wave correction in the opposite direction. And second, there was a triangle in the position of wave 4) of the five-wave decline and the Wave principle states that triangles precede the final wave of the larger sequence. In USDJPY’s case, that is wave 5). So, the 4-hour chart led us to conclude that “a recovery to 108.00 should soon begin.” That was 19 days ago. An up to date chart is given below.
usdjpy elliott wave analysis april 13 trade war
USDJPY has not reached 108.00 yet, but it is almost there. In addition, the recovery took the bulls a lot less time than we expected. Had we ignored the charts an listened to the trade war narrative, the pair’s rally would have caught us completely by surprise. Besides, recognizing a pattern on a chart turns out to be a lot easier than predicting President Trump’s decisions.

What would USDJPY bring next week? That is the subject of discussion in our next premium analysis due out on April 16th.



Stay informed with our newsletter

Latest Elliott Wave analysis on different topics delivered to you weekly.

Privacy policy
You may also like:

GBPJPY: Bearish Reversal Expected Near 151.00

GBPJPY has been in recovery mode since it touched 139.90 on August 15th. On September 21st, the pair climbed to a multi-month high of 149.72, but fell to an intraday low of 146.51 yesterday. As of this writing, the Pound is hovering around 147.90 against the Japanese yen. The time is appropriate to apply the…

Read More »

USDCAD Unreliable Resistance Identified in Advance

After slightly exceeding 1.3000 on October 8th, USDCAD retreated to 1.2926 two days later. Given that the pair has been declining since the 1.3386 top registered in late-June, assuming the bears are returning was quite justified. In addition, there was a declining trend line, which had previously led to significant selloffs on two separate occasions.…

Read More »

USDJPY Gave Us a Road Map Three Months Ago

There is a reason why it is called “trading” and not “bottom/top picking”. The latter is literally impossible even with the best trading tools and techniques. Even the Elliott Wave Principle, which we consider to be the best method for price behavior analysis, cannot tell us the exact price level at which the market is…

Read More »

GBPCAD ‘s Rally Needs a Healthy Pullback

October is shaping up to be a good month for GBPCAD bulls. The pair dipped below 1.6600 on October 2nd, but quickly reversed to the upside for a recovery of over 470 pips so far. Earlier today the Pound climbed to as high as 1.7070 against the Canadian dollar. However, extrapolating the current trend into…

Read More »

A Week of Trend Reversals in the Forex Market

The Forex market was very interesting to observe last week. Major news like the Non-Farm Payrolls report in the U.S., the new trade deal between the USA, Canada and Mexico, and Bank of Japan’s determination to keep fighting deflation all contributed to an eventful five days in the world’s largest market. News and events is…

Read More »

USDMXN: Is the 18.50 Support Going to Hold?

It has been over two months since our last article about USDMXN. On July 27th, the Forex pair was trading slightly above 18.6150. The Elliott Wave Principle then suggested “a corrective rally to 19.50 – 20.00 is about to interrupt the downtrend in the near future.” The logic behind our optimism was simple: there was…

Read More »

EURUSD: When the Fed Supports the Elliott Wave View

Following a recovery of more than 500 pips in a little over a month, EURUSD suddenly crashed from 1.1815 to 1.1570 last week, erasing half of its recent progress in just a few days. The selloff came after the Fed raised its benchmark interest rate for the third time this year on Wednesday and promised…

Read More »

More analyses