USDJPY continues to drop after last week's break out of an important reversal Elliott wave pattern. How far will price go downside before the bullish trend resumes? The following analysis is based on 14 November USDJPY Elliott wave analysis.
14 November, AtoZForex - Last week, we looked at an important Elliott wave pattern - the diagonal pattern. This is likely to be a leading diagonal so a bearish correction was expected from 114.75. We alerted immediately the pattern completed at 114.75. From that level, it has continued to drop. From the time frame we looked at, the pattern was a reversal pattern. Motive waves are generally reversal patterns while corrective waves are continuation patterns. At the end of a motive wave - impulse wave or diagonal, we expect price to correct/retrace or make a total change of direction. On the other hand, price continues the prevailing trend once a corrective pattern is completed. In the next paragraph, we will also show an important reversal chart pattern at the top of USDJPY that compliments the bearish continuation.
Let's quickly review the last update as usual. The chart below was used.
The chart above shows the completion of the diagonal pattern. A 3-wave bearish move will now be expected to 111 or above at 111.64.
The chart below shows what we have now.
14 November USDJPY Elliott wave analysis: what next?
The chart above shows a significant breakout and price making a pullback. The bearish correction is likely to continue to 111. Often times corrections that follow leading diagonals get to its second wave. Thus, 111.63 and 111 are good bearish targets. In addition to the diagonal, an head and shoulder chart pattern is emerging. Head and shoulder is a reversal pattern. Though price already looks bearish from this Elliott wave perspective but the formation of this pattern is a compliment especially if price breaks below 113 neckline. A strong rally above 113.9 is cautionary. The whole setup will be invalid above 114.75. Stay tuned for the next update.
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