“The second scenario assumes the pair could still be in a larger sideways correction, a triangle for example. If this is the case, the exchange rate could stay trapped between 121.80 and 115.50 for a while.” This is the final sentence of our previous update on USDJPY, called “USDJPY Worked Like a Charm” So far, the top of 121.80 has not been reached. Instead, the pair has been moving sideways. This behavior reminds us more and more of a triangle correction under construction. See the idea on the chart below.
Triangles consist of five waves, labeled A-B-C-D-E. It appears that the USDJPY exchange rate is currently in the middle of wave D to the upside, because the advance from 115.85 to 118.85 is too small to be the whole D wave. If this count is correct, once wave D is finished, we should expect another decline in the face of wave E, which would complete the whole wave 4 triangle. By any means, if our assumption of a triangle is right, the bottom of wave C should stay untouched. According to the Elliott Wave Principle, triangles precede the last move of the larger sequence. The big picture outlook suggests this one here is wave 4 (orange), preceding wave 5 (orange) within the larger wave 3 (black). In conclusion, USDJPY should resume its uptrend as soon as the correction is over. Targets around 123.00 look highly probable.
