Fibonacci Support Sent USD/JPY Skyrocketing
EWM Interactive | Sep 21, 2018 05:55AM ET
Earlier today, USD/JPY climbed to 112.88, which is just 30 pips shy of its 2018 high at 113.18 reached in mid-July. Just two weeks ago, on September 7th, the pair fell to as low as 110.38, which means it has gained as much as 250 pips in just 11 trading days. How come? Was there something to tell traders that such a big move was around the corner?
Yes, there was, and it was hidden in plain sight on the 30-minute chart of USD/JPY below, which we sent to clients before the open on Monday, September 10th.
As usual, we reached a conclusion after examining the price action through the prism of the Elliott Wave Principle. Eleven days ago it revealed that USDJPY’s rally from 109.77 to 111.83 was shaped like a perfect five-wave impulse, followed by a three-wave decline to 110.38 or slightly below the 61.8% Fibonacci level.
In other words, there was a complete 5-3 wave cycle on the 30-minute chart of USD/JPY. According to the theory, the exchange rate was supposed to go in the direction of the five-wave sequence. There was a lot of sense in holding long positions as long as 110.38 was intact. The updated chart below shows what happened next.
The bulls took the wheel and never looked back. The top of wave 5 of the impulse at 111.83 was exceeded on September 13th and longs who stayed put for another week were generously rewarded with another 100 pips as USD/JPY kept rising to 112.88 as of today.
The best thing about Elliott Wave analysis is that it spares traders the trouble to have to follow external market factors such as news and events. The trade war between the United States and China is in full swing and speculations about central banks’ interest rate decisions will always have their role in the Forex markets. But for Elliott Wave analysts, who speak the market’s own patterned language, the news “is startling only to those unaware of the trend”, as Ralph N. Elliott once put it.
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What will USDJPY bring next week? That is the subject of discussion in our next premium analysis due out on Sunday!
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