Good morning everyone!
I looked at USDJPY and realized that the market is likely tracing an ending diagonal which started once we exited the triangle formation in February. Ending diagonals consist of three advancing waves and two corrective waves, all five waves being zigzags. Turns out we have already completed Wave 1 which was a zigzag, Wave 3, which was also a zigzag, and now we are tracing wave 4.
Had we had just a mere impulse out of a triangle, this would be already over. Yet the movement continues, at the same time demonstrating zigzag'ish behavior. Because the triangle is always the last correction before the last advancing movement, labelling the remaining movement as an ending diagonal would make the most sense today.
A few conclusions can be drawn from the present setup:
1) USDJPY need to go further down, in order to touch 122.00 and fulfill one of the properties of an ending diagonal, which says that Wave 4 needs to touch Wave 1.
2) Continued correction in JPY will also impact DXY - likely there will be no immediate sizeable advance in DXY within 2 week time.
3) Because the correction in JPY is not over, it is also likely that other components of DXY are not going to advance to new lows/highs immediately, but will remain in the correction mode for another couple of weeks (So, potentially, more upside in EURUSD as well in the near term).
4) One the correction is over, we will have another wave of USDJPY advance, which will correspond to another big wave strength of USD. The target could be in 126.00 handle, corresponding to W1=W3 equality and could match the size of triangle base (T on the chart).
5) The most interesting part will start after we reach the end of wave 5. Consider the following:
- we exited a triangle (which is always the last corrective structure before the _last_ advance in the sequence
- we are forming an ending diagonal, which is a weaker structure than an impulse, and retraces faster
Both of that combined mean that once wave 5 is complete we are going to see a very fast, sharp retracement back to at least the origin of the ending diagonal (118.86). Even further, we need to consider that the whole advance in USDJPY from 75 was a correction to the impuse that started even before 2000. The corrections are usually more than fully retraced, so a lot more strength in JPY, and consequently downsize in USDJPY will be observed in the coming years.
I looked at USDJPY and realized that the market is likely tracing an ending diagonal which started once we exited the triangle formation in February. Ending diagonals consist of three advancing waves and two corrective waves, all five waves being zigzags. Turns out we have already completed Wave 1 which was a zigzag, Wave 3, which was also a zigzag, and now we are tracing wave 4.
Had we had just a mere impulse out of a triangle, this would be already over. Yet the movement continues, at the same time demonstrating zigzag'ish behavior. Because the triangle is always the last correction before the last advancing movement, labelling the remaining movement as an ending diagonal would make the most sense today.
A few conclusions can be drawn from the present setup:
1) USDJPY need to go further down, in order to touch 122.00 and fulfill one of the properties of an ending diagonal, which says that Wave 4 needs to touch Wave 1.
2) Continued correction in JPY will also impact DXY - likely there will be no immediate sizeable advance in DXY within 2 week time.
3) Because the correction in JPY is not over, it is also likely that other components of DXY are not going to advance to new lows/highs immediately, but will remain in the correction mode for another couple of weeks (So, potentially, more upside in EURUSD as well in the near term).
4) One the correction is over, we will have another wave of USDJPY advance, which will correspond to another big wave strength of USD. The target could be in 126.00 handle, corresponding to W1=W3 equality and could match the size of triangle base (T on the chart).
5) The most interesting part will start after we reach the end of wave 5. Consider the following:
- we exited a triangle (which is always the last corrective structure before the _last_ advance in the sequence
- we are forming an ending diagonal, which is a weaker structure than an impulse, and retraces faster
Both of that combined mean that once wave 5 is complete we are going to see a very fast, sharp retracement back to at least the origin of the ending diagonal (118.86). Even further, we need to consider that the whole advance in USDJPY from 75 was a correction to the impuse that started even before 2000. The corrections are usually more than fully retraced, so a lot more strength in JPY, and consequently downsize in USDJPY will be observed in the coming years.
