Bottom line:  USDJPY bearish structure remains intact as 110.30 resistance holds for now. A bearish reversal day here, could set the tone up for a push towards 106.00 at least..

Technical Analysis:

USDJPY interim counter trend rally might have carved a lower high at 110.13 levels yesterday.  Prices have managed to reverse lower, just shy of 110.30 resistance. A consistent push below 109.00 levels would confirm that bears are firmly in control and that prices should be looking to push through 106.00 and further. Looking at the short term wave counts since 110.30 highs; USDJPY might have carved a lower degree Wave 1 and 2 respectively. The drop from 110.30 through 108.31 was in 5 waves labelled as Wave 1, while subsequent rally towards 110.13 might be corrective, and hence labelled as Wave 2. If the above counts are correct, USDJPY bears could be preparing for a similar degree Wave 3 drop that could reach 106.80 respectively.  Alternately, a push above 110.30 could indicate a test of 110.70 before potential price reversal. Looking at the overall wave structure since 112.30 highs, the USDJPY has produced a classic 5-3 Elliott Wave pattern. The drop between 112.40 and 104.50 was an impulse labelled as Wave (1). A similar degree corrective wave A-B-C potentially terminated through 110.30 levels respectively.  If the above counts are correct, a larger degree Wave (3) could be underway towards 104.5 and lower. Furthermore, waves 1 and 2 within (3) are also in place around 108.31 and 110.13 respectively. If the above structure holds, we could witness a sharp bearish reversal as 3^rd of 3^rd wave begins to unfold. Traders might be willing to initiate short positions around 109.80/110.00, with protective stops above 110.30 and potential target as 106.00 and 104.50 respectively. Watch out for a potential Engulfing Bearish candlestick formation on the daily chart.

Prepared by

Harsh Japee, Technical Analyst.

USDJPY Chart

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