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USD/JPY: First Up, Then Down...Where to Next?
Why the latest move in dollar-yen had more to do with Elliott waves than the Bank of Japan.
By Vadim Pokhlebkin
Thu, 12 Jul 2012 18:00:00 ET
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On July 12, the Bank of Japan held a meeting regarding Japan's interest rates. Forex traders watch events like this closely for clues as to where the country's currency -- the Japanese yen, in this case -- would go next. The July 12 BOJ interest rates decision was no exception.
 
The central bank was expected to keep rates unchanged at 0.1% -- and it did. That's not the interesting part -- the interesting part is what USD/JPY, the U.S. dollar-yen exchange rate, did before and after the announcement.
 
Leading up to the meeting, the yen strengthened and pushed USD/JPY down to 79.11. Then USD/JPY shot straight up to 79.96. Then it fell right back down to 79.20. Here's how forex analysts explained the volatility: First, the USD gained against the yen on hopes of further monetary easing by the BOJ. Then, when the BOJ disappointed the dollar buyers, the JPY got the upper hand and crashed USD/JPY back down.
 
It's a perfectly good explanation of what the market did. But what if you had a method that told you about this spike/crash scenario before it happened?
 
Please take a look at this intraday Elliott wave-based forecast our forex-focused Currency Specialty Service posted at 3:11 AM New York time on July 11 -- one day before the BOJ met to set interest rates:
 
USDJPY (Intraday)
Posted On: Jul 11 2012 3:11AM ET / Jul 11 2012 7:11AM GMT
Last Price: 79.325
 
...allow for this corrective bounce in three waves from 79.205 to exceed 79.510 and carry towards 79.717 before downtrend resumption takes hold again.
 
 
 
Above, notice the projected market path shown with the blue line. And now take a look at what USD/JPY actually did (circled in red):
 
           
 
How did Elliott wave analysis "know" the exact path USD/JPY would take? Well, for starters, it had nothing to do with the Bank of Japan.
 
The Elliott Wave Principle says that all market action fits into one of the 13 known wave patterns. On July 11, our Currency Specialty Service saw that the up-down sequence was needed to finish the Elliott wave pattern underway in USD/JPY. That's it. 

Find out where the pair is likely headed next -- up or down, plus get USD/JPY price targets -- inside our Currency Specialty Service now >>


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Tags: Bank of Japan, Elliott wave, Elliott Wave trading, forex, forex trading, Interest Rates, Japanese yen, online trading, U.S. dollar, usd/jpy
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