USDJPY is currently struggling to hold above 112.00, following a rally from 110.67 to 113.80. Last week’s recovery of more than 300 pips came out of the blue, just after the pair made a break below the previous bottom at 110.97. Most traders must have gone short at the breakout, which is understandable through the perspective of conventional technical analysis. But the Elliott Wave Principle is a much more sophisticated forecasting method, which in this case, warned us not to join the bears near 111.00. We, in turn, warned our premium clients, by sending them the following chart of USDJPY on March 14th.(some of the marks have been removed for this article)
As visible, there was a triangle at the bottom of the daily chart of the pair, labeled a-b-c-d-e. According to the theory, triangles precede the last wave of the larger sequence. Since the larger sequence was clearly pointing down, we thought USDJPY should make one last bottom before reversing to the north. The chart above was all an Elliott Wave analyst needs. The chart below shows how the exchange rate looks like today.
When the forecast was sent to our clients more than two weeks ago, USDJPY was trading near 113.80. Soon after that, it fell to 110.67, before bouncing back up to 113.80. In this case, the theory allowed us to extract a lot of information from the daily chart of USDJPY. First, that another sell-off from 113.80 to below 111.00 was likely. Second, that we should not get overly bearish, when 111.00 is breached. And third, that once 111.00 is broken, the bulls are supposed to return. This is an excellent example of the Wave principle’s ability to help traders correctly anticipate reversals in the FOREX market, just by recognizing one single pattern.
What to expect from now on? What is the bigger picture saying? Is USDJPY going to continue even lower or the support near 112.00 would turn out to be too strong for the bears to breach? Prepare yourself for whatever is coming. Order your on demand Elliott Wave analysis now or pre-order the one due out next Monday at our Premium Forecasts section. Stay ahead of the news in any market with the Elliott Wave principle.
