USDJPY fell to as low as 105.54 on May 3rd and just when the picture was beginning to look more and more negative, the bulls decided they have had enough and came back to lift the pair to 110.58 so far. This 500-pip recovery must be a painful wound for the bears, which would have been better off staying aside, since there were plenty of warning signs that a reversal is near. The daily chart of USDJPY, for example, provided our premium clients with at least two, when we sent it to them on May 2nd.
First, when we applied the Elliott Wave Principle to the above-shown chart, the result suggested the entire decline from the top at 125.85 is a (W)-(X)-(Y) double zig-zag correction, which appeared to be approaching to its termination point. Once the entire corrective pattern was over, a reversal could be expected.
Second, as if to confirm the bullish expectations, the relative strength index indicator was showing a strong bullish divergence between the lows of waves A and C of (Y).
Turns out the chart above gave traders enough signs to warn them that the trend in USDJPY is about to change its direction very soon.
But in order to be able to spot these signs, one has to have the proper perspective. The Wave principle’s perspective. This method has numerous benefits, but among the most valuable ones is the ability to help traders predict trend reversals. Because no trend lasts forever. Relying on the old one, while it has already ended could be a costly mistake. Learn to avoid it with Elliott Wave analysis.
What to expect from now on? What is the bigger picture saying? Is USDJPY going to continue even higher or the resistance near 110.60 would turn out to be too strong for the bulls to breach? Prepare yourself for whatever is coming. Order your on demand Elliott Wave analysis now or pre-order the one due out on Monday at our Premium Forecasts section. Stay ahead of the news in any market with the Elliott Wave principle.