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USDJPY broke higher last week, out of a triangle pattern that we have been tracking since mid-April. This triangle has been placed in wave four, so we must be aware of a bearish reversal in the next few days/weeks if we consider that these type of patterns occurs always prior to the final move of the larger trend.

So, the current leg up should be our final leg then; most-likely wave 5 of an ending diagonal. However, each leg in an ending diagonal should be sub-divided, by minimally three waves, so the current pull-back is probably a wave (b) with a wave (c) yet to come that may hit the 103.00/103.50 level.

After a completed ending diagonal we will be looking for a sharp reversal lower. A fall back beneath 100 would be a first but important sign for completed ending diagonal and weaker prices ahead.

USDJPY Elliott Wave Analysis Technical outlook May 14 2013 currency trading

What Is Ending Diagonal?

An ending diagonal is a special type of pattern that occurs at times when the preceding move has gone too far and too fast, as Elliott put it. A very small percentage of ending diagonals appear in the C wave position of A-B- C formations. In double or triple threes, they appear only as the final “C” wave. In all cases, they are found at the termination points of larger patterns, indicating exhaustion of the larger movement.

Ending Diagonal Elliott Wave Analysis Theory