Yen breakout of downward channel puts 100.00 in focus: Elliott Wave

The Japanese yen has been trading down vs. the U.S. dollar (FOREX:USDJPY) for the last three weeks from 100.55 to 96.50, but now direction seems to be changing if we respect the importance of Elliott wave pattern and channeling technique.

On the 4h chart below we can see that the pair made only three waves of decline, refereed as a corrective movement as Elliott put it. Notice that wave C was very similar in distance compared to wave A, which is one of the most important guidelines when we are looking for end of wave C. In fact, recent reversal higher from 96.52 has already extended through the upper channel resistance line, which is another important sign for a trend-change, from bearish now to bullish mode. However it would be nice to wait on a daily close price before turning point is confirmed. So if pair will close above 98.00 level or around that figure, then we will be looking back toward the 100 mark or even higher in the next few days, while 96.52 support holds.

USD/JPY 4h

On a daily chart we can see that price is sideways, but if we respect the range-bound market then looking toward the upper side of the range from current levels makes sense at this stage.

USD/JPY Daily

Educational Part:

What is a three wave A-B-C move in Elliott Wave theory?

A 3-wave structure labeled A-B-C is called a zig-zag that generally moves counter to the larger trend. It is one of the most common corrective wave patterns.

  • Structure is 5-3-5
  • wave A must be a motive wave
  • wave B can only be a corrective pattern
  • wave B must be shorter than wave A by price distance
  • wave C must be a motive wave.

About the Author

Gregor Horvat, based in Slovenia, has been in the forex markets since 2003. He is a technical analyst and individual trader who has worked for Capital Forex Group and TheLFB.com. He also is founder of forex services on www.ew-forecast.com. EW-Forecast.com provides technical analysis of the financial markets, highlighting behavioral patterns based on the Elliott Wave Principle (EWP). Website: http://www.ew-forecast.com/

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