There is more upside potential in USDJPY

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January 8, 2015
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January 13, 2015

The USDJPY is making a  strong bounce today and has recovered back above 119 after trading last week in the low 118s. The current price action in  this fx pair implies that there are increased chances that a new upward move has already started with target near 122-123. The wave structure from 101 price level implies that we may have completed wave 4 and we should expect wave 5 to unfold over the first quarter of 2015. Not only is wave 4 complete, but I believe that  also the 1st wave of the final 5th wave is complete and the question now is whether wave 2 of 5 is complete or we should expect one more final leg downwards the 61.8% retracement of the rise from 115.50 to 120.80.

USDJPY3

The decline from 120.80 has an overlapping structure and thus is characterised as a corrective move relative to the impulsive rise from 115.50 to 120.80. This corrective decline is most probably complete and a new upward move has begun today. Price is below the Ichimoku cloud resistance so a break above 120 will increase the chances of the bullish scenario. A rejection at the Ichimoku cloud resistance will imply that the correction is not over and we should expect a final push lower towards the 61.8% retracement.

USDJPY

The bigger picture as shown in the chart above implies that wave 4 is complete at the 38% retracement and we are already inside wave 5 and to be precise we are trading currently at wave 2 of 5 or wave 1 of 3 of 5. I prefer the bullish case where wave 2 of 5 is complete and we have started wave 3 of 5 with 122-123 equality target. Being more optimistic wave 3 could extend relative to wave 1 and even reach 124-125.

USDJPY2

In the short-term it is important for bulls to break above and out of the red downward sloping channel. This will confirm the bullishness of this pair. Important levels to watch out are 120 and 120.80 above us and 118 and 11750 below current price. Concluding I’m bullish this pair expecting it to reach 122-123.

As always, thank you for taking the time to catch up on my thinking.

Alexandros Yfantis
Alexandros Yfantis
Fascinated by financial markets, studied International Securities Investment and Banking in the UK, works as a Portfolio Manager in Greece and runs a technical analysis website. Enjoys travelling and spending time with his family and preparing for the black belt in Korean Karate.