The EUR/JPY nose-dived during February, but wave analysis suggests that bulls could return in full force immediately.
This analysis will take a closer at what may be in stall for the EUR/JPY in the days and weeks ahead.
(Readers please note that this wave analysis has not taken into consideration the larger wave structure prior to the start of the bull trend in 2016. This means that longer-term outlook is not clarified. However the short-term wave analysis should be clear enough to make for a sound forecast regardless)
The weekly chart above shows the bull trend on which the EUR/JPY has embarked since 2016. The trend wave structure and momentum flow are the most clear when viewed from this time frame. These point towards the completion of wave 3 and 4 of the uptrend, probably with at least one more leg up to occur over the the coming weeks. The AO indicator shows very typical peak readings for wave 3 which should have finished on Jan 8. The reading has only now crossed below the zero line (implying wave 4), and price should be ready for the final swing up in wave 5.
Let’s take a closer look at the more recent price-action to see what patterns can be spotted there in order validate this scenario.
The 4 hour chart above shows the very complex sideways correction that took place between Sep and Dec 2017. The impulse that followed (Dec 15 2017 – Jan 5 2018) is far too short in relation to the overall trend to have been the final wave 5. Instead it was most likely Wave 5 of 3. The price action that followed was somewhat deceiving initially but now that the strong bearish impulse played out from the high of Feb 2, the pattern becomes very clear as an expanded flat. Its dimensions fit well as wave 4 of overall bull trend.
This implies that price should proceed quickly to the upside from here on in a large 5 wave impulse in order to confirm the scenario. It is still early, so initial ups and down are to be expected while the new swing builds up a series of small higher lows and higher highs.
If the analysis is correct price can easily reach 140.00 and beyond. 144.00 is the 61.8% Fibonacci extension level of Wave 3 which is a bigger possible target.
All the best along your trading journey