The situation on the USDJPY charts has complicated a lot lately, and price went way beyond our July 1 analysis (bearish on usdjpy). At this point from the EW perspective it's not easy to determine if this move down is going to be resumed soon (more probable) or will be retraced 100%, however the technicals are showing a probable imminent retracement of the recent rally (caused to a large extent by the fundamental backdrop). We are looking at a possible W2 up which threatens to retrace up towards 120.00 in the weeks to come.
On the daily charts, we are looking at a possible 5 red waves formation complete (forming a large light blue wave), a possibility that will only be confirmed by a breach above the highest trendline on our charts (currently our target). The daily is also showing a huge bullish reg div, which also will have to be confirmed later on. Until that happens (if ever), we are looking for signs of retracement on the smaller timeframes.
On 4h we see the last red wave down complete, with 5 black waves within clearly visible, also a first push up (black wave), followed by a pullback. This picture suggests a new black wave 3 up, started at 113.98 and possibly moving up towards 118 (our target), a 161% fib of wave 1. This assumption will only be confirmed by a clear break of 115.50, which we expect to happen during the next trading sessions.
If this is to happen, the first sign will be a break of 115.05 (current res. on the smaller timeframes), where we want to step in. We have a buy order at 115.15, which will also be a W3 breakout on the smaller formation within the W3 black wave we referred to earlier (as I mentioned several times before these minor waves should not be trusted much for mid-term analysis however they often offer good entry points).
Stop is set at 114.71, the point where the minor waves scenario will be (temporarily) negated. However this will not affect much the broader outlook, which for now seems bullish. Break of 115.50 will be the confirmation I'm looking for (to know that the trade should continue my way).
Let's see how this is working out...
2007-08-22, 10:15 GMT - Long @115.15 - EW , +176 pips
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