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USDJPY: Corrective Pull-back May Extend To 86.80

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Jan 23 2013

USDJPY reversed lower in the past 48 hours from a new high printed above 90 figure. Notice that pair extended slightly through the impulse channel support line (connected from blue wave three and four) and is now testing levels of 87.80 support. Typical the former wave four will be ideal zone for a continuation of a larger trend, which in our case that would be to the upside. However, decline from 90.26 was made only in one leg that can be counted impulsively, which means that pair will most-likely extend even deeper in black wave 4 since we need three waves of decline, because that’s the minimum structure of a corrective price action. The next thing is that broken trend-line will also turn in to a resistance which could happen in minor wave (b) pull-back to 89.30 and cause a new sell-off in wave (c) of 4. With that said, we see room for further USDJPY weakness towards 86.80 while pair is capped below 90.26.



Larger daily picture for USDJPY also suggests that deeper pull-back is underway after completed five waves up in wave 3 with bearish divergence at the top.




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