Good morning team,
Unfortunately, there was a couple of fake breakouts from technical structures yesterday on the AUDJPY and EURNZD. This morning we are taking a look at the USDJPY which is trading at a key mirror resistance zone and the top of a channel formation.
USDJPY 4 Hour Charts
We can see a bearish divergence coming into play on the RSI suggesting bulls are running out of steam. There has also been a completion of a major wave 1 with an ending diagonal formation (rising wedge), suggesting we could see a larger correction. The 107 resistance is a mirror level to a previous key zone, if we see a rejection from this level targets can be found around 105, which may set up for an inverted head and shoulders formation.
USDJPY – 1-Hour Charts
Waves 1 and 5 are of a similar length with the full extension in wave 3 which ticks the box for Elliott waves theory. Waves 1,3 and 5 all have 5 sub-waves which also suggests the formation has completed.
We are now looking to trade a possible correction lower.
Trade Setup: SELL market execution, current price 106.73, stop loss 107.43 and take profit target 105.33.
Stop loss: 70 pips
Take profit: 140 pips