USD JPY has been extending its correction a few times during the last six months. Nevertheless, it was unable to reach 104.95 so far, which means that our long term count is still valid. Having that in mind, let’s see how the chart of the USD JPY exchange rate looks like now.
Apparently, the retracement that started from 100.75 could have been over long time ago, but the Market decided to form something, which seems to be a double zig-zag correction, labeled w-x-y. Furthermore, the price is held between the parallel lines of a corrective channel. If this is the correct count, we should expect wave (3)/C to the downside, unless USDJPY goes to 104.95, thus invalidating this scenario. Another reason for being bearish on this pair is the fact the wave (4) of the previous impulsive wave is a triangle and triangles precede the final swing of the larger sequence – in this case wave (5). According to the Elliott Wave Principle, after every five waves there is a three-wave correction in the opposite direction. By far, this condition has not been fulfilled, which is why we prefer staying bearish on the US dollar against the Japanese yen.
