Technical Outlook:

USDJPY has produced an impressive rally by over a 100 pips yesterday. The currency is seen to be trading above 107.00 handle as we prepare this article and high probability remains for yet another high above 107.15 before correcting lower again.

USDJPY is currently retracing the drop between 109.85 and 106.50, as a potential expanded flat a-b-c. If the above short term counts are correct, it should be preparing to rally towards 108.50 before finding resistance. It would be seen as a lower degree wave ii termination, before wave iii resumes lower again.

Structurally, USDJPY seems to have broken out of a bearish triangle at a larger degree. The drop between 112.22 through 101.20 was the breakout wave, marked as Wave (1) on the chart here. The subsequent rally towards 111.75 could be Wave (2). If the above long term counts hold, USDJPY could be unfolding a Wave (3) lower towards 101.20 and further. For the above count to remain valid, USDJPY should stay below 111.75.

Alternately, USDJPY might have found interim support around 106.00 handle. A break past 109.85 would confirm that the currency is heading higher above 111.75 and subsequently 112.22 as well. We would re-visit the counts in that case, and turn bullish.

At the moment, an expanded flat corrective wave could be unfolding towards 108.00/50, before USDJPY resumes lower again. It is a safe trading strategy to consider selling on rallies towards the above handle, with risk above 109.85, going forward.

USDJPY remains good to sell on rallies until prices stay below 109.85 interim resistance in the short term.



Trading Strategy:

Short against 109.85, targeting below 101.50.



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