The USD JPY foreign exchange pair has been in a strong uptrend. Earlier today it climbed to as high as 117.04, but reversed sharply to the downside after that. Is this pull-back set to extend? The chart below could help us form an opinion.
In the Elliott Wave Principle‘s catalogue of patterns there is one called “ending diagonal“. It is a reversal pattern, which means we should expect it to form as a fifth wave or a C-wave. In the above-shown example we suspect we have an ending diagonal in the position of wave V. The lower trend line, connecting the bottoms of wave 2 and 4, has already been broken. It used to provide support, but now it could become a resistance for wave 2/B. If this is the correct count, we should expect another decline in wave 3/C to the south in USD JPY. This bearish scenario would be invalidated, if prices go above 117.04.
