In the middle of April, EUR/JPY touched the lows of 126.00. A month later, it went close to 137.00. An 11-figure recovery may sound encouraging, but are the bulls here to stay? The Elliott Wave Principle suggests otherwise. In order to attain a proper perspective, we need to take a look at the daily chart of EUR/JPY and track the price’ path down all the way from 149.80.
EUR/JPY Daily Chart
From this point of view, we see a five-wave impulse from 149.80 to 130.15. According to the theory, every impulse is followed by a correction in the opposite direction. In EUR/JPY’s case, the correction looks like an expanding flat with extremely protruded B wave. If you measure it, you will see it is exactly 161.8% the length of wave A. Wave C slightly exceeds the same Fibonacci ratio. If this count is correct, the decline we are witnessing in the last two days could turn out to be just the start of a larger slump in EUR/JPY. While the minimum targets lie below 126.00, the count would need to be reassessed if the exchange rate returns above 137.