Good morning team,
This is not a trade set up, this is just some analysis so you are aware of a set up we are preparing for. The USDJPY is on our watch list for a potential reversal.
Back in March we enjoyed a great win shorting the USDJPY from the ending diagonal formation. This was after a five wave structure higher was formed.
Since then we have witnessed a corrective structure lower and the market is currently trading on a key support zone at the 38% FIB retracement – 105.22. The next key level can be found at 103.70.
We are waiting for wave 2 to complete.
Keep in mind wave 2 generally eliminates the majority of wave 1 and tends to reach either the 38% or 23% fib retracement levels.
This means we are keeping a close eye on the USDJPY for potential reversal opportunities at these levels for the next leg higher.
USDJPY 1 Hour Charts
On the short term time frame there is currently a negative trend line providing resistance. We will only look for long opportunities once we see a bottom formation, for example an inverted head and shoulders or a double bottom. We may consider entering a long position once there is a break of the negative trend line.
The DXY has been hammered over the past couple of weeks making it hard to go in the favour of the USD.
The DXY looks set to reach the 161% FIB extension at 92.80 after breaking through a key support level. We will be waiting to see how the USD reacts around the next support zone.
Keep a close eye on this pair, we will keep you updated once any position is placed.