Bottom line: the divergence between USD/JPY and Nikkei needs to be solved in one out of two ways 1) a move lower in Nikkei or 2) USD/JPY needs to play catchup and move significantly higher. Given the long term technical setup I prefer option 2. I will stick to this view as long as USD/JPY trades above 99.02. Feedback welcomed !
Chart 1 Divergence between USD/JPY (White) & Nikkei Index (Orange): while the Nikkei Index managed to sustain its gains USD/JPY is falling back to the lower end of its 99/106 range.
Chart 2 Nikkei 225: The Index broke out from its declining channel making the bottom of wave ‘4’ (14,864) the new pivot level. Overall the Elliot wave setup favors a move higher over time.
Chart 3 USD/JPY: The CCY pair is trying to base above the 99.02 / 100.6 area. Looking at the wave structure it seems like we are either in some kind of basing process between 99.02 and 107.49 or did not hit a low yet.
Regards,
Barry Lyss - Makor Capital
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