The USDJPY bulls made a spectacular performance in the last two weeks. The US dollar rose from 118.86 to 125.05 against the Japanese yen. But the Elliott Wave Principle suggests it could already be too late to buy. Let’s take a look at USDJPY’s impressive rally and see if we can find some early signs of a probable bearish reversal.
As the chart demonstrates, the recent advance has been developing as a five-wave impulse. The theory postulates that every five waves should be followed by a retracement of at least three waves in the opposite direction. If we apply this knowledge to the current situation in USDJPY, we will come to the conclusion that now is not the best time to go long, because a correction to the south is likely to occur.
Furthermore, wave 4 is a triangle. Triangles are known for preceding the last wave of the old trend. Here, wave 5 should be that last wave. We cannot know whether it is already over or not, but once it is, the bears are about to come back.