close icon

USDJPY False Breakout Right On Schedule

USDJPY’s rally from 108.80 came to its natural end last week, when the pair climbed to 114.50. The rate exceeded the mid-May high of 114.36 for what is usually called a “bullish breakout.” Unfortunately, instead of rising even more, the U.S. dollar reversed sharply to the south to reach 111.55 yesterday for a decline of almost 300 pips against the Japanese yen. In the end, the much anticipated bullish breakout turned out to be nothing but a “false breakout.”

usdjpy false breakout
Breakouts are something technical analysts spend a lot of time reading and learning about and generally rely on in trading. So it is really annoying when a textbook breakout setup fails like this. Then traders start looking for an explanation. Why did it fail? Or someone to blame. Who made it fail? The bankers? The market-makers? My broker?

One of the many advantages the Elliott Wave Principle has over conventional technical analysis is that Wave analysts rely on breakouts much less often. In fact, the Wave Principle can even warn you about a false breakout ahead. The one we are discussing is just an example.

The following chart of USDJPY was included in the analysis we sent to clients before the market opened last Monday, July 10th. As visible, we were spared the search for an explanation. (some marks have been removed for this article)

usdjpy elliott wave analysis july 10

Exactly ten days ago, while USDJPY was hovering around 113.90, this chart revealed the corrective nature of the entire price development since the bottom at 108.13 on April 17th. The pair appeared to be approaching the end of a (w)-(x)-(y) double zig-zag correction. Therefore, wave (y) was supposed to slightly breach the top of wave (w) in order to finish the whole sequence. Then, a bearish reversal should be expected.

No matter how precise the analysis, picking tops or bottoms is not worth the risk, so we never advise subscribers to try that. We did, however, write that “staying aside is safer.” It was, indeed, safer than buying the bullish breakout, wasn’t it?



Stay informed with our newsletter

Latest Elliott Wave analysis on different topics delivered to you weekly.

Privacy policy
You may also like:

Crude Oil and USDJPY Ruled by One Pattern

Everything was going so well for USDJPY and crude oil bulls until last week, when both the exchange rate and the WTI crude price made sharp bearish reversals. Oil fell from as high as $72.88 to $67.40 a barrel, while USDJPY plunged from 111.40 to 108.95. Normally, the media tried to explain the selloffs with…

Read More »

USDMXN Precisely Followed Its Elliott Wave Path

It has been almost four months since we last wrote about USDMXN. On January 30th, the pair was hovering around 18.70, following a sharp selloff from 19.90 to 18.30. The good news was that instead of wondering what the Dollar-Mexican Peso exchange rate was going to do next, we managed to recognize a very reliable Elliott…

Read More »

GBPAUD On a Slippery Slope Towards 1.53

If you take a look at how GBPAUD has been doing between October 2016 and March 2018 you might think Brexit never happened. The British pound rallied from as low as 1.5322 to 1.8509 against the Australian dollar, gaining almost 21% in those 18 months. As of this writing, the pair is hovering around 1.7720,…

Read More »

USDZAR Facing Elliott Wave Resistance Near 13.00

USDZAR, the ticker symbol of the U.S. Dollar – South African Rand Forex pair, is not among the ones we regularly cover. However, we are constantly looking for article material, so when a client asked us if we could take a look at it, we told him – no problem. The only thing we needed…

Read More »

EURCAD Bulls Setting Up a 400-Pip Recovery?

The European currency has had a tough time recently, losing ground against major rivals like the U.S. dollar and the Japanese yen. Here we are going to examine the Euro’s drop against the Canadian dollar, which has been in progress since March 20th, when EURCAD climbed to a multi-year high of 1.6153. The last time…

Read More »

EURUSD: The Evolution of an Elliott Wave Count

Less than three months ago, on February 16th, the EURUSD pair climbed to a three-year high of 1.2556. Given the fact that Euro bulls have been in control during the entire 2017, it made sense to expect more strength from the European currency against the U.S. dollar. In addition, after four months of negotiations, in…

Read More »

AUDUSD: A Bearish Omen Half a Century in the Making

AUDUSD climbed to 1.1079 in July 2011 and has been steadily declining ever since. In mid-January 2016, the pair fell to as low as 0.6826 and as of this writing it is still in the doldrums, hovering around 0.7560. After a 38% crash in less than five years, one might think it is time for…

Read More »

More analyses