Based on the original article “Elliott Wave Analysis of USDJPY – August 4th, 2023” by EWM Interactive, here is a rewritten and expanded version of the analysis, converted into a comprehensive article of at least 1000 words. The original insights are acknowledged and built upon for clarity and detail.
Title: In-Depth Elliott Wave Analysis of USDJPY as of August 4, 2023
Author: Adapted from EWM Interactive
The USDJPY currency pair has seen significant volatility over the course of the past two years. After reaching a multi-year high in October 2022, the pair began to display a corrective behavior consistent with Elliott Wave Theory. This article elaborates on the Elliott Wave perspective offered by EWM Interactive and expands upon it by integrating the potential implications for traders and investors alike.
Overview of Elliott Wave Theory
Elliott Wave Theory is a technical analysis approach developed by Ralph Nelson Elliott in the 1930s. It identifies price movements as unfolding in fractal wave patterns driven by collective investor psychology. Under this framework:
– Trend movements advance in five waves:
1. Wave 1: Initial move in the trend direction
2. Wave 2: Pullback against Wave 1
3. Wave 3: Strongest, longest wave in the trend
4. Wave 4: Corrective dip
5. Wave 5: Final push before trend reversal
– Corrections follow in three waves:
– Wave A: Move against the trend
– Wave B: Partial retracement
– Wave C: Continuation of the correction
Analyzing the Recent Performance of USDJPY
USDJPY reached a peak at 151.94 in October 2022, signaling exhaustion at the end of a long-term uptrend. According to EWM Interactive, this move likely marked the end of a fifth wave of a larger Elliott Wave cycle. Since then, price action has retraced, and the correction has unfolded in three waves typical of an A-B-C corrective formation.
Breakdown of the Corrections Since October 2022:
– Wave A: The initial drop brought USDJPY from 151.94 down to 127.22 by January 2023. This decline was steep and appropriate for Wave A of a correction.
– Wave B: A recovery rally followed, characterized by the climb from 127.22 to 145.07 by late June. As a corrective rally counter to the main trend, this suits the behavior of a Wave B.
– Wave C: The beginning stages of Wave C then followed. In August 2023, USDJPY traded near 143, implying we could be entering the deeper leg of Wave C.
Wave B’s Characteristics and Indicators of Exhaustion
The rally from the January 2023 low to the June high formed a clear A-B-C structure of its own under lower degrees:
– Wave A of B: A strong upward burst from 127.22 to about 137.90
– Wave B of B: A retracement down to near 133.50
– Wave C of B: A final rally up to 145.07
Wave C of B appeared to complete a five-subwave impulse, which is indicative of a terminal move. EWM Interactive noted that this completion was confirmed soon after the end of June when bearish signals emerged.
Signals of Potential Reversal Found in:
– RSI divergence: As USDJPY pushed to higher highs in late June, momentum indicators failed to follow, suggesting weakening momentum.
– Overhead resistance: Price failed to convincingly break through resistance levels formed during the initial drop from October 2022.
Development of Wave C Down
EWM Interactive highlighted that a new decline that started in July 2023 likely marked the beginning of Wave C of the larger three-wave correction. Elliott Wave principles suggest Wave C typically unfolds as a five-wave impulse in the
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