One of the most common complaints against Elliott Wave analysis is that the wave counts are subject to change, and also the same graph can be interpreted differently by different analysts. The trouble with all this is the accusations are true! Why, my own Elliott Wave count of USD/YEN published in this blog on 12th April is being changed in today’s update. But anyone who has been following my work carefully would know (and others can verify by going back and checking) that my old count worked perfectly fine in judging the direction, and that is what is important to the trader! Yet, I am changing my count today…The bottom line is we should use wave analysis as a tool that guides us in the market, not as a black box that will produce massive amounts of money.

Onwards now to discuss the outlook for USD/YEN using Wave analysis…

In an earlier update (12 Apr 2011) , when USD/JPY was at 84.10 and still climbing, I said that we will fail at 86.90 and come down in a 5th wave to 77.80. However the rally fizzled out at 85.54 and the currency pair went down to 79.55.
The recovery from 79.55 has been slow, but sure. We have a hurdle within a stone’s throw at 82.55 and again at 82.95. Only above this can a dollar bull breathe slightly more easily. Failure at 82.55 will set up what I will view as the final leg down for the bears. You should also take note that I now consider that the cyclical low was posted at 76.30 and the next bout of weakness will complete a potential wave 2, setting up the stage for a massive rally in USD/YEN later this year. -Ramki