Elliott Wave Analysis: NZDJPY Is Showing A Bearish Set-up
NZDJPY was trading sideways last year, but this year it’s showing us that Bears can take the lead.
We want to show you, how we recognize a clear pattern and the wave structure, based on Elliott wave theory.
Let’s start with 4h chart, where we see two really nice and pretty clear flat corrections in different degrees. In EW theory, correction means a temporary pause before the trend continues. So, if we compare a flat correction formed in March with a flat correction formed in May, then we can assume, what is the next move.
In Elliott wave theory, a five-wave move indicates the direction, a three-wave move means a correction. So, if we take a look on hourly chart, we can see an EW labelling in details. A big three-wave A-B-C flat correction in wave 2), which seems to be completed and price can be turning now with five sub-waves down and as we said, five waves indicate the direction or in this case a bearish reversal.
When we are looking for clear structures and patterns, we always want to be sure as much as possible and we always look for confirmations. So, we found another reason that NZDJPY could face a drop, maybe even an impulsive one.
So, the main reason for drop could be stocks, which can be trading near resistance zone. Why stocks? Well, stocks are more or less correlated with USDJPY and when stocks and USDJPY begin to fall, Japanese yen can become very strong and usually causes a decline on all XXX/JPY crosses.
You can see a correlation chart between NASDAQ and NZDJPY, which gives us a confirmation for a turn into a risk-off mode.
NASDAQ vs. NZDJPY, 15MIN
Disclosure: Please be informed that information we provide is NOT trading recommendation or investment advice. All of our work is for educational purposes only.
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