Bottom line: USDJPY could still hold its bearish structure since 112.40 remains intact. With the recent drop looking complete, bulls might be preparing for at least a pullback towards 110.00/20.
Technical Analysis:
USDJPY might have completed its drop that began from 112.22 levels on February 20, 2020. Looking into the wave counts since 112.22 highs, USDJPY might have unfolded into 5 waves completing an impulse. If the above count is correct, a corrective rally could be expected towards 110.20 levels if not any further. Aggressive traders who went short from 112.00 levels earlier, might be willing to take profits for now (107.50) and remain flat. Another wave probability could be as follows: USDJPY has been drifting sideways on a larger degree and unfolded into a contracting triangle labelled as A, B, C, D and E. Please note that we had discussed last week about the probability of Wave E unfolding as a triangle itself. As highlighted on the chart here, Wave E triangle could be complete with the recent drop between 112.22 and 107.00 respectively. This falls in line with the projections made last week that the drop could find support around 107.50 levels. Also note that prices has stalled right at the triangle support trend line and a bullish reversal cannot be ruled out. Considering the triangle count to be complete, USDJPY might be preparing for a breakout on the north side, and a push above 112.40 would confirm. In either of the above, USDJPY is expected to produce a rally towards 110.20 at least or break out of the triangle above 112.40 levels respectively. Most traders might be willing to initiate fresh long positions from current levels (107.40/50), with a protective stop below 106.82 and a projected target towards 112.40 and higher as triangle breakout.
Prepared by
Harsh Japee, Technical Analyst.
USDJPY Chart
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