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Counter Trend Patterns Working in USDJPY and EURUSD

Counter Trend Patterns Working in USDJPY and EURUSD

Jeremy Wagner, CEWA-M, Head of Education


What's on this page

Our Elliott Wave analysis is suggesting USD weakness in USDJPY and EURUSD while Crude Oil may continue its downward correction.

The video above is a recording of a US Opening Bell webinar from June 4, 2018.

Elliott Wave Theory Applied to USDJPY shows the correction may not be complete

In our last webinar, we cited how the USD patterns look weak driving USDJPY lower with an initial target zone of 107.25-108.80. USDJPY prices have since fallen to 108.11 so is that all of the correction?

It is possible to count the correction lower as complete. However, there is another Elliott Wave count that suggests another dip to below 108.11 (labeled below). We can count a small degree impulse wave from the May high that suggest another down leg may be on the horizon.

The key level to monitor is the May high at 111.40. So long as the USDJPY price remains below 111.40, the market is at risk of further losses.

A move below 109.07 increases the odds of further losses to below 108.11 as USDJPY may be in the middle of a bearish zigzag pattern labeled a-b-c. We do believe this correction will be a partial retracement of the March 23 up trend and hold above 104.63

USDJPY Elliott Wave forecast suggesting another correction possible.

Crude Oil Reverses to Test Support Trend Line

It took a while, but crude oil finally reversed lower once it completed its longer-term pattern. We wrote back in early May how the longer-term crude oil price patterns nears a terminal point with some wave relationships in the $71-74. After topping on May 22, crude oil prices have fallen nearly 10%. Most Elliott Wave patterns continue to point towards lower levels especially on a break of the blue trend channel.

A break below the blue trend channel may send crude oil prices down to $58-60 with even lower prices possible. The bottom line is that we may see a deep correction in the latter part of calendar year 2018.

Crude oil price forecast using Elliott Wave.

EURUSD Elliott Wave Chart Hints at a small relief rally

Though news has recently been bearish EURUSD, the Elliott Wave pattern calls for a relief rally up towards 1.18-1.20. We have been short EURUSD with our first short entry at 1.2350 and our 2nd short entry at 1.2153 as prices hit our first target of 1.1554 on May 29. The Elliott Wave patterns still point towards lower levels over the medium term though several short-term patterns point to 1.18-1.20.

We need only to be concerned about the downtrend should EURUSD press up to 1.2155 or higher.

EURUSD Elliott Wave forecast suggesting a small rally within a downtrend.

Elliott Wave Theory FAQs

What are Elliott Wave impulse waves?

According to Elliott Wave Theory, the market moves five waves in the direction of the near term trend followed by a three wave counter trend wave. An impulse wave is one of two types of motive waves that denotes trend direction. Therefore, if we see a bearish impulse waveform, then after a three-wave counter trend wave, we can anticipate at least one more bearish motive wave.

If you are seeking further study into Elliott Wave Theory, read about our expert tips in our beginners and advanced trading guides.

After reviewing the guides above, be sure to follow future Elliott Wave articles to see Elliott Wave Theory in action.

What is the biggest mistake traders make?

Regardless of the style of analysis, many traders do lose money because they do not take the time to study the market and the effect of leverage. At DailyFX, we have studied millions of live trades and boiled our study down into a Traits of Successful Traders guide. You will find how leverage and human nature affects our trading so you can be better prepared for the next correction.

Elliott Wave Theory can be applied to a variety of highly liquid markets. FX is one of my favorite markets to apply the Elliott Wave principle. Learn more about trading FX with this guide specifically designed for you.

You might also be interested in…

* 3 things I wish I knew when I started trading forex

* What is the impulse wave pattern and how do you trade it?

* EURGBP Elliott Wave Chart Hints at Losses Towards 86 Cents

---Written by Jeremy Wagner, CEWA-M

Jeremy Wagner is a Certified Elliott Wave Analyst with a Master’s designation. Jeremy provides Elliott Wave analysis on key markets as well as Elliott Wave educational resources. Read more of Jeremy’s Elliott Wave reports via his bio page.

Communicate with Jeremy and have your shout below by posting in the comments area. Feel free to include your Elliott Wave count as well.

Discuss these markets with Jeremy in Monday’s US Opening Bell webinar.

Follow me on Twitter at @JWagnerFXTrader .

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.