It has been over five months since CHF/JPY began recovering from as low as 101.74 in June. During this time, the pair managed to gain over 1000 pips and is currently trading slightly above 111.00. This impressive rally might make most people think it is time to join the new uptrend before it is too late. Truth is, the fact that CHF/JPY is rising does not mean it is in an uptrend. The Elliott Wave Principle is famous for its ability to identify the trend’s direction, so let’s apply it to the weekly chart of CHF/JPY and see what happens.
As visible, CHF/JPY’s trend actually starts from 138.88 in January, 2015. It makes three waves to the south, labeled with 1-2-3, where wave 3 is almost exactly 1.618 times the length of wave 1, which is typical within impulsive waves. The problem is that the entire pattern is not an impulse yet. We believe it is going to evolve into one. Therefore, the current advance could be seen as wave 4 of the five-wave sequence. Fourth waves usually terminate near the 38.2% Fibonacci level of wave 3. In addition, the upper line of the trend channel drawn through the lows of wave 1 and 3 should also provide resistance in the same region. All this leads us to the conclusion, that CHFJPY might be aiming at 114.00, but the greater part of the rally is already behind us. Once this figure is reached, the pair is likely to reverse to the downside again in wave 5, which should take it to a new low below 101.70. In our opinion, long positions have a chance of succeeding only in the short-term. In the longer one, CHF/JPY is still under bearish jurisdiction. Keep that in mind.