Elliott Wave Analysis of USDJPY: An In-Depth Look at the July 21st, 2025 Outlook
Adapted and expanded from the original article by EWM Interactive
The foreign exchange market is inherently complex and volatile, influenced by macroeconomic indicators, geopolitical developments, and market psychology. One tool that traders utilize to cut through the noise is Elliott Wave analysis, which offers a systematic approach to forecasting price movements based on identifiable recurring wave patterns.
In their July 21st, 2025 update, EWM Interactive provided a detailed Elliott Wave interpretation of the USDJPY currency pair. Building upon that analysis, this article aims to offer an expanded look into the current structure, forecast implications, and potential risks by delving into wave counts, Fibonacci retracement levels, and long-term support and resistance areas.
Overview of Elliott Wave Theory and Its Application in Forex
Ralph Nelson Elliott developed Elliott Wave theory in the 1930s, proposing that market prices move in repetitive cycles or “waves,” caused by investor psychology that alternates between optimism and pessimism. The theory identifies a five-wave pattern in the direction of the main trend, followed by a three-wave corrective structure.
– Motive wave: Consists of five waves (1, 2, 3, 4, 5) moving in the direction of the overall trend.
– Corrective wave: Consists of three waves (A, B, C) against the trend.
In Forex, Elliott Wave analysis is applied to spot potential turning points and project future price action, offering clues about trend continuation or reversal. Traders pair wave counts with Fibonacci measurements to identify likely targets and risk areas.
Current Structure of USDJPY Based on Elliott Wave Analysis
As of July 21st, 2025, USDJPY appears to be in an extended corrective cycle following a durable impulse wave from the prior year. According to the original analysis by EWM Interactive, the currency pair concluded a bullish five-wave advance and is now undergoing a standard A-B-C correction.
This is observed in the following structural pattern:
– Wave A: Initiated the correction with a sharp decline, signaling the end of the primary uptrend.
– Wave B: Countertrend rally that retraced approximately 61.8% of Wave A, consistent with typical corrective behavior.
– Wave C: Currently underway, characterized by a decline consistent with an impulsive structure potentially subdividing into five smaller waves.
Detailed Wave Count Breakdown
Let’s explore the internal composition of the corrective structure to understand the price action in greater detail.
• Wave A
– Marked a steep drop from the previous high of approximately 155.80.
– Terminated near 147.20, forming a clear impulse on the daily timeframe.
– Largely driven by a weakening U.S. dollar as inflation pressures eased and Treasury yields retreated.
• Wave B
– Retraced a significant portion of Wave A, topping around 151.90.
– Characterized by diminished volatility and overlapping sub-waves, typical of countertrend rallies.
– The rally met resistance at the 61.8% Fibonacci level of Wave A, confirming the corrective nature.
• Wave C
– Initiated following rejection at 151.90.
– Current price hovers around 148.30 with projections pointing further downward.
– Subdivides into five waves, suggesting it is an impulsive move that will complete the larger A-B-C correction.
Fibonacci Projections and Support/Resistance Zones
One of the strengths of combining Fibonacci ratios with Elliott Wave analysis is the ability to forecast high-probability target zones. Based on the wave structure so far, potential price objectives and critical technical levels include:
• Key Fibonacci Targets
– 100% of Wave A, measured from the top of Wave B, implies a Wave
Explore this further here: USD/JPY trading.