Recent analyses of the USDJPY currency pair indicate that the rally reaching a high of 156.76 marked the conclusion of wave X, aligning with a corrective phase against a larger cycle originating from the high established on March 7, 2024. Following this peak, the pair has begun a downward trajectory that is unfolding as a five-wave impulsive structure, characteristic of Elliott Wave theory. This method of analysis allows traders and market analysts to predict potential future movements based on the psychological patterns of market participants.
From the 156.76 high, the first leg of the decline, designated as wave (i), was completed at 155.14. The subsequent correction, termed wave (ii), peaked at 155.78, only to be followed by a significant drop as wave (iii) reached a low of 153.85. The market then experienced a minor upward correction in wave (iv), which touched 154.74 before the final leg of the impulsive move down, wave (v), completed at 153.83. This sequence of five waves has notable implications for the broader market trend, indicating a robust bearish sentiment currently at play.
Following the completion of wave ((i)), a corrective rally classified as wave ((ii)) emerged, described as an expanded flat correction, ending at 155.88. Such corrections are crucial as they tend to trap traders, misleading them into believing that a reversal is underway. However, the price action has since resumed its downward motion, commencing wave ((iii)). The development of this wave has unfolded with wave (i) settling at 153.54 and an upward swing of wave (ii) peaking at 154.72.
The strong move of wave (iii) has since escalated, concluding at a notable low of 149.52. This persistent move suggests that the market is firmly entrenched in bearish territory and continues to demonstrate selling pressure, evidenced by the completion of wave (v) at 149.46, thereby finalizing wave ((iii)) of the higher degree.
Looking ahead, the expected behavior of the USDJPY currency pair appears to suggest further declines. As evidenced by the completion of wave ((iii)), the price action is anticipated to rally briefly in wave ((iv)), with projections suggesting a peak around 150.74. However, the prevailing sentiment remains decisively bearish, and further downside pressure is forecasted, particularly as the pivotal high at 156.76 remains intact, indicating that any rally attempts may face strong resistance.
Ultimately, traders should prepare for an additional leg lower, expected to finalize wave ((v)), thus completing wave 1 at a higher degree. This move could signify a potential for a corrective cycle to unfold thereafter, as the market would likely rally in wave 2 to counter the current downturn before resuming the bearish trend subsequent to the high established on November 15, 2024.
Thus, the Elliott Wave framework provides a structured lens through which to analyze and anticipate the evolving complexities within the USDJPY market, underscoring the vital importance of understanding wave formations for informed trading decisions.