Less than a month ago, on October 16th, USDJPY fell to 111.65 and it looked like more weakness would follow. Instead, the pair is currently trading above 114.30, after it climbed to 114.73 yesterday, November 6th. The good news is that traders did not have to watch from the sidelines, because the Elliott Wave Principle was there to help. On Wednesday, October 18th, when it was time for us to send the mid-week updates to subscribers, the Elliott Wave analysis of the hourly chart of USDJPY below suggested higher levels should be expected.(some marks have been removed for this article)
As early as October 18th, there were signs the bulls were not ready to give up yet. The reason for our bullishness was a five-wave impulse from 107.31 up to 112.71. This pattern indicated that an uptrend was in progress. In addition, the following three-wave correction was recognized as a running flat, where wave a) is a simple a-b-c zig-zag, followed by another one in wave b) up, whose wave “b” was a triangle, and an ending diagonal in the position of wave c).
So, there was a complete 5-3 wave cycle on the hourly chart of USDJPY. According to the theory, the trend was supposed to resume in the direction of the impulsive sequence. In addition, the upper line of the ending diagonal wave c) was breached, which not only served as a confirmation of the bullish reversal, but also provided a specific stop-loss level at 111.65 to protect the long positions. Three weeks later, here is an updated chart of the U.S. dollar against the Japanese yen.
It did not take long for the bulls to lift the pair to a new swing high. More importantly, the key level at 111.65 was never in danger. A single chart saved us the trouble of relying on external factors such as news and events by revealing a trading setup waiting for us to take advantage of.