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Boarding the 130.00 USDJPY moving train – Elliott Wave Analysis

Major rally in USDJPY started back in October 2011 after hitting an all-time traded low at 75.32. A year after,  the rally accelerated reaching 103.71 in May 2013, finally peaking at 105.44 in late December last year.

The following December-July consolidation is still in a fresh memory. Typical for a non-trending environment, multiple false signals have been given prior to an ultimate break-up. This has initiated a new eight wave cycle* from which the third wave is under way today.

To arrive at a most accurate price target of the motive waves three and five, we have used four different techniques to get a cluster of target prices to evaluate the most probable outcome.

1. Projecting wave one by 1.618 and 2.618 gives a price target of 119.79 and 128.74 respectively for the wave three.

2. By projecting the 100% height of the Oct11 – Dec13 rally from the 101.09 (Jul14) key higher low, we get a price target of 131.21 for the wave five.

3. Upward scope towards the top of the Oct12 – July14 long-term bull channel gives a (moving) target of 122.85 (rising by .25 per week) for the wave three.

4. Upward scope towards the 1990-1998 long-term downtrend line gives a (moving) target of 123.06 (falling by .02 per week) for the wave three.

As the pool of evidence suggest, it appears we are at the early stages of a rally with a sufficient upside. Through different projection techniques stated above, we have arrived at the target area of 119.79-123.06 for the prevalent wave three. For a wave five, an initial target points at 130.49.

* “One complete cycle consisting of eight waves, then, is made up of two distinct phases, the five-wave motive phase, whose sub waves are denoted by numbers, and the three-wave corrective phase, whose sub waves are denoted by letters.” Prechter R., Frost A. (2005). Elliott Wave Principle. Georgia: New Classics Library