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Dollar vs Yen: Reversal at 80 Day VTL signals possible move down

Resistance Ahoy

USDJPY is an interesting one at the moment. Last week it shot up on the back of some fundamental interaction in the form of jobs numbers in the US. Lets look at the long term picture first, weekly candles:

USDJPY_£__daily_09_02_2015There was a trough of at least 54 month magnitude in February of 2012, leading to the current bull market we have seen until this point. According to Hurst’s nominal model there are 3 18 month cycles in one 54 month cycle. The last trough of which occured in October last year and was accelerated by talk of more money printing in Japan, no doubt. The last 18 month cycle in a 54 month cycle can expected to be bearish in nature, or at least neutral so I am expecting some significant downward moves in the coming months before the next 54 month trough in early 2016.

Moving onto the medium term lets zoom into the most recent action of the 18 month cycle:

USDJPY_£__daily_09_02_2015mediumThere was a clear 18 month trough on the 15th of October last year. This moved up strongly then made an 80 day trough in the middle of December, coming in at around 62 days, a typical 80 day length in the nominal model. An 80 day VTL could then be drawn from the 18 month trough upward connecting the two troughs.

  • 20 week current average: 17.5 weeks. Elapsed: 16.7w
  • 80 day current average: 69.3 days. Elapsed: 55 days
  • 40 day current average: 38 days. Elapsed: 24 days
  • 20 day current average: 19 days. Elapsed: 6 days

80 Day VTL Broken Early

As you can see above the 80 day VTL was broken to the downside after the first 20 day FLD projection was undershot. The 20 day FLD projection to the downside was overshot. The crossing of the VTL implies the 20 week peak had formed already on the 23rd of December so the outlook was bearish until the 20 week trough is formed. I think the 20 week is still to come here, judging by the cycle lengths which I have added to the chart. If that is the case this should be a great shorting opportunity as the spike up is retraced.

Elliott Wave Triangle

Those familiar with Elliott Wave will perhaps notice the triangle consolidation forming here:USDJPY_£__daily_09_02_2015triI think if we do see a downside move from here then the 20 week trough could well form at the 40 day upwards VTL. This would be an ‘E’ wave in Elliott Wave terms.

Here is one final chart, intraday 4 hour for a more detailed look:

USDJPY_£__4 x hour_09_02_2015shortI will short on a break of the 20 day VTL and FLD for a quick move down if it gets bearish. If USDJPY breaks the 80 day downward VTL shown on the daily chart above I will have to assume the 20 week trough is formed – but it will be unusually short.

The 20 week trough is forecast in this analysis around the 20th – 23rd of this month.

 

2 comments

  • Pawel

    Hi. Thanks for your analysis. Must tell that in elliott wave theory triangles often is a consolidation in 4 wave with exit to previous direction. And exit from such ABCDE triangles – final price move in than direction. In this case we can see upward move in 5 wave

    • Hi Pawal, yes probably. I am not a EW expert by any means but thought it would provoke some discussion. In any case USDJPY broke the 80 day VTL so the scenario is bust for me. Good luck!

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