The USDJPY currency pair has recently displayed intriguing price action that is underscored by Elliott Wave analysis. The significant rally to 156.76 has marked the conclusion of wave X, which signifies a correction against the high recorded on March 7, 2024. This situation sets the stage for potential downward movement, as the pair appears to have established a bearish trend following this peak.
Breakdown of the Impulsive Structure
The decline from the 156.76 level has unfolded in a distinct five-wave impulsive structure. The initial leg down, identified as wave (i), found its low at 155.14, establishing a basis for subsequent movements. A corrective wave (ii) then pushed the pair up to 155.78, but this was merely a temporary retracement rather than a reversal of the prevailing downtrend.
Moving further into the sequence, wave (iii) took the pair even lower to 153.85, marking a significant step in the ongoing bearish trajectory. Following a brief rally classified as wave (iv), which peaked at 154.74, the final segment of this decline — wave (v) — concluded at 153.83, thus completing the first major wave (i) within the higher degree structure. This sequence of impulsive waves emphasizes the established downtrend and suggests that further declines are imminent.
After completing wave ((i)), a corrective rally emerged in wave ((ii)), culminating at 155.88 as an expanded flat formation. This pattern indicated a temporary respite in the broader downtrend, but it also sets the stage for renewed selling pressure. The resumption in wave ((iii)) has seen declines that were again structured in five-wave sequences, with wave (i) bottoming at 153.54, followed by a minor correction in wave (ii) reaching 154.72.
The subsequent leg down, wave (iii), dropped the price substantially to 149.52, which points to a strong impulse behind the bearish movement. Following this, waves (iv) and (v) of the same sequence effectively completed wave ((iii)) at 149.46, rounding out this segment of the Elliott Wave structure.
As we analyze the current state of USDJPY, the projections look to extend lower, with expectations firmly grounded in the context of wave ((v)). This anticipated move suggests a completion of wave 1 in the higher degree, following which a corrective rally in wave 2 is expected. Such a rally would seek to offset the downward pressure from the cycle since November 15, 2024.
Traders should keep a vigilant eye on the pivotal level established at 156.76. As long as this high remains intact, future rallies are likely to fail at defined swing levels of 3, 7, and 11, thereby reinforcing the downtrend for additional downside movement.
The Elliott Wave framework provides a comprehensive understanding of the USDJPY’s current volatility, highlighting both the immediate and longer-term market dynamics that will shape trading strategies in the weeks to come. By recognizing the patterns embedded within this analysis, traders can position themselves advantageously as the market unfolds.