GBPJPY has been correcting lower since forming a high at 174.84. The initial decline to 168.28 came in three waves, after which the pair staged a recovery to 173.67, which also occurred in three waves.
New lows were put in below 168.28, but the drop from 173.67 - 167.67 did not occur in five waves, which rules out the idea of a flat (3-3-5) correction and leaves us with a 3-3-3 double correction. This allows for another leg lower towards the 165.50 - 167.07 area.
This is where we expect wave four to complete and the rally to resume. As a result, this would also be a good place to start looking for long positions in other risk assets as this week's trading continues to unfold.
By Eric Morera of Elliottwave-Forecast.com
