Does Elliott Wave Principle work when Central Banks intervene? Remember that wave analysis is one of our tools for trading. We are not attempting to use this as a forecasting tool as much as we use it to decide ‘when’ to buy or sell (for a low-risk trade) and to determine how far a move can travel.
Central banks intervene when forex markets behave in a disorderly fashion. While everyone realizes that a strong Yen will only make it more difficult for Japan to rebuild itself, we have to remember that the Yen is a freely traded currency, and one test of the bottom is usually not enough. So I am inclined to label the current recovery as a 4th wave within an irregular correction. This would mean that USD/YEN will likely make one more attempt to the downside. It is perfectly possible that the BOJ (and its allies) will show up when we break below 78, setting up a potentially ‘failed’ fifth wave. In the meanwile, for the finance manager who has to make payments in Yen in the near term any recovery to 86.90 region will be a chance to buy some relatively cheap Yen, and maybe get some more sleep at night.
Very nice chart Ramki . This would very much support my view of a 5th wave down yet to be completed in Nikkei which should make a generational buying opportunity problem as always is predicting the bottom. As we saw before, intervention can be swift but indeed that v shaped bottom in usd/jpy and nikkei has the look of a fast and furious bear market rally yen lends itself to those sharp spikes down
Raulin, thank you
I never thought of this perspective. Was seeing the current rally as wave ‘a’ of a three wave up move. One more lesson!!
Muthu, It is just a different perspective. We will know whether it is right or wrong only later.
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