Bottom line:  USDJPY might have terminated its counter trend rally at 110.21. Prices should hold below 110.21 at least, for bears to take control back.

Technical Analysis:

USDJPY should be looking to resume lower against 110.21, as the Daily Chart carved an inverted Pin Bar candlestick pattern on January 14, 2020. Please note that counts have been readjusted after prices broke above 109.68 last week and a potential C of (2) has been marked at 110.21. Looking at the overall wave structure and counts since 112.40 highs, the USDJPY has carved a potential 5-3 Elliott Wave pattern. The drop from 112.40 through 104.45 was seen in 5 waves marked as Wave (1) on the daily chart view. Subsequent rally from 104.45 through 110.21 is seen in 3 waves A-B-C, marked as Wave (2). Ideally, a 5-3 pattern should be followed by another 5 wave movement towards the major trend which is down in this case. Furthermore, Wave (2) has already retraced more than 61.8% of Wave (1) as seen here. If the above counts are correct, prices should ideally stay below 112.40 and push towards 104.45 levels at least. Hence, a high probable trade setup is bearish from here, against 112.40, with potential targets below 104.45, going forward. The above wave structure has taken around 9 months time, and the targets below 104.45 should ideally take around 9-12 months to unfold. Alternately, a push above 110.70 would threaten the above bearish structure, and bulls might be poised to push above 112.40 mark. Watch out for a bearish reversal from around current levels while a break below 109.45 would confirm that a meaningful top is in place at 110.21. A break above 110.21 should be short lived and expect a sharp reversal lower again.

Prepared by

Harsh Japee, Technical Analyst.

USDJPY Chart

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