Bottom line:  USDJPY bearish structure should prevail until prices stay below 110.70 levels, going forward. A potential Wave (2) termination at 109.72 still holds good and it remains to be seen if prices reverse from here.

Technical Analysis:

USDJPY bears potentially remain in control as 109.72 resistance holds good and the overall bearish structure would still remain intact until prices stay below 110.70, going forward. The medium term wave structure since 112.42 highs remain bearish as prices dropped 5 waves lower between 112.41 and 104.50, labelled as Wave (1) here. Furthermore, the rally between 104.50 and 109.72 has sub- divided into 3 waves A-B-C; labelled as Wave (2). If the above medium term wave structure holds well, prices should ideally stay below 110.70 mark (fibonacci 0.786 resistance of the previous drop), and push lower towards 104.50 and further, as Wave (3) sub-divides into 5 waves. Ideally, a classic 5-3-5 Elliott Wave pattern seems to be underway. Alternately, a consistent push above 110.70 levels would threaten to break above 112.42, invalidating the existing bearish structure. At the moment, a high probable trade direction from here is expected to be on the south side against 110.70, with potential price targets below 104.50. A break below 108.40 would confirm and accelerate the drop towards 106.30 and further, as highlighted here. Please note that a marginal push above 109.72 would still keep the above structure intake and one should remain short with potential stops placed above 110.70 levels. Immediate price resistance on the daily chart is seen just below 110.00, and test is possible before prices reverse. Watch out for a bearish reversal either from current price levels at 109.50/60 or from 110.00 levels, going forward. The US Dollar weakness expected across major currencies also falls in line with the above structure.

Prepared by

Harsh Japee, Technical Analyst

USDJPY Chart

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