In our April 7 analysis of USD/JPY we were positioned short and the analysis proved right hitting our upper target of 108 region, even though the lower bound of our target was as low as 106.

One week later we posted an update on USD/JPY and  as expected 108.3 level served as a hesitation point, however on a second trial it broke leading USD/JPY towards 107.87, however it did not make a new low, which leads us to believe that the following scenario might be the most probable for the time being.

USDJPY 1H 19-04-2016

From the moment the triangle (wave 4-analysis) broke on the Daily Chart, we kept counting USD/JPY and wave 5 seems to have bottomed given that we can count 5 smaller waves within. The rally which started from 8th of April is impulsive and the pullback which erased almost 90% of that rally was a correction.

USDJPY 30m 19-04-2016

(On the chart above) This is the most probable scenario for USD/JPY, and the yesterday’s and today’s rally might be the initial phases of the 3rd wave, which may top around 110.93 level on the 1.618 extension from wave 1 and 2. What we need to see today is that it should test 109.50-109.70 level in the upper bound of the channel and then start to slow down.

After that, a corrective A-B-C should erase not more than 61.8% of yesterday’s and today’s rally if USD/JPY is to break higher in the 110.93 target.

We will be observing the 108.8, 108.6 (38% and 50% retracement respectively) to see how price will react and an ideal Long Entry would be around 108.5-108.6 levels.

Stop Loss 108.17 or 107.8 and target above 110.5 firstly and 110.93 at the most.

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