The last six months have seen USD/JPY fall lower and lower like there is nothing that could stop it. The rallies have been stunted and short-lived, and the declines have been cliff dives! The Japanese central bank and the Government have been trying everything in their power to put a stop to the Yen rally but no avail.
But!
The time is coming soon when the Japanese government may regret ever thinking of a weaker Yen, because if this wave count is correct, the Yen is about to undergo the greatest devaluation it has seen in decades!
The Elliott wave structure that prices have been tracing out recently is becoming more and clearer as the weeks go on, with a three wave structure to the downside completing as I write this.
Corrective declines happen in three waves which are labelled A, B,C. The ‘C’ wave is the final wave in a correction and will always subdivide into five waves itself.
With this in mind, let’s take a look at the long term chart:
The long term count Views USD/JPY in a three wave rally to the upside, Wave A up, in red, is complete since the middle of last year, wave B has been under way since then, and is nearing a completed structure right now.
You can see the A wave rally in the chart above subdivided into 5 waves which can be clearly counted. The 100 level is very important as it provided support to the internal wave 4 ( green ) of A. It also marks the 50% retracement of the whole 5 wave structure.
Make a note of this price level for later.
Wave B down should compete in three waves A, B,C in green above, with the internal wave structure of the decline taking the form of 3,3,5 the C wave down should subdivide into 5 waves, and that appears to have happened.
Let’s take a look at the shorter term chart:
The last few months of jaw-dropping declines have brought the pair to lows we have not seen since 2014. But the internal wave structure seemed to have all but completed a C wave decline.
10673 is the 38.3% retracement of the overall rally. Prices came through that level today we will see in short order if this level holds, I think the 50% retracement of wave ‘A’ is a more likely level for the market to turn and a rally to begin. But between now and then we are actively looking for a completed count and signs of a reversal upwards.
Wave A up started at 7000 and carried on until 12500, that is a 5500 point rally in 4 years, It is normal for the C wave to match the points travelled of wave A. If wave B ends around the 100 level. Then a C wave rally could bring prices to the 15500 level pretty easily.
This is the opportunity that we will be looking to capitalise on.
It has become too easy to sell USD/JPY of late, and it is high time that the market was rattled out of complacency.
Check back again for short term updates on the price action.
Disclaimer. The views and opinions expressed in this blog are those of the authors and do not necessarily reflect the official policy or position of any other agency, organization, employer or company. Assumptions made in the analysis are not reflective of the position of any entity other than the author – and, since we are critically-thinking human beings, these views are always subject to change, revision, and rethinking at any time. Please do not hold us to them in perpetuity.
