USDJPY has been moving sideways between 101 and 104 for over 3 months now. In our opinion, the moment of breakaway is just around the corner. The direction of this breakaway should be to the south. In order to support this statement we will show you two charts – 4-hour and 1-hour time-frames. Let’s start with the bigger one.
The orthodox top of wave V is a truncated fifth wave labeled (5) at 104.90. From that level down to 100.73 there is a perfect five-wave impulse, marked with (1)/A. The corresponding three-wave correction is a double zig-zag labeled (2)/B, which ended at 104.11. When those levels were reached, some major institutions said that the rally could easily go to 107. At the same time we, at EWM, published an article preparing you for a major decline. As visible on the chart, USDJPY fell from 104.11 to 101.31. On the next chart you will see how the price action in the white rectangle looks like from an Elliott Wave point of view.
As you can see, the fall to 101.31 is also impulsive. That is why in our previous analysis of USDJPY we stated that a new move to the downside should be expected. However, the Market decided to extend the retracement in wave 2 (white), exactly to the 61.8% Fibonacci level, which happens quite often with second waves. The expected new move to the south began soon after, which, as the chart shows, has a five-wave structure once again. Five-wave sequences show the direction of the larger trend. So what we have in USDJPY is a series of 1-2 1-2 1-2 waves, which come to tell us that we have to prepare for the sharpest and steepest of all – a third of a third of a third wave. If this is the correct count, you should not be surprised, if USDJPY crashes to 98.00 or lower during the next month or two, which would perfectly fit into our big picture outlook.