USD/JPY Completes Bullish Wave-3 and Awaits Wave-4 Pullback

The USD/JPY has made a bullish continuation towards the -61.8% Fibonacci target – as expected in our previous UJ Elliott Wave analysis.

The bearish 4 hour candlestick pattern, however, is indicating a pause within the uptrend. What can traders expect next? Let’s review. P

Price Charts and Technical Analysis

The USD/JPY seems to have completed a bullish wave 3 (grey). The strong and lengthy push up for 200+ pips from 103.50 to 105.75 is typical for such an impulsive wave 3.

The recent bearish engulfing candlestick pattern, however, could signal the end of the bullish momentum… and the start of a bearish correction. Such a pullback is likely to be a choppy wave 4 (grey).

These are the main patterns to keep in mind for wave 4:

• A triangle pattern (grey arrows) followed by a bullish breakout (blue arrow).
• An ABC correction (orange arrows) towards the 38.2% Fibonacci level followed by a bounce (green arrows).

But keep this mind: a deeper pullback below the support trend line (green) and 61.8% Fibonacci retracement level places the uptrend on serious hold (yellow button). Also, a break below the 78.6% Fib invalidates it (red circle).

On the 1 hour chart, the 5 waves (green) of wave 3 and 5 (orange) become better visible.

The current bearish breakout below the 21 ema zone and the support trendline (dotted green) is the first one since 27 January.

What does this mean?

1. A bearish wave A (orange) of the wave 4 (grey) has probably started.
2. The divergence pattern (purple line) usually sends price back to the 144 ema zone.
3. An ABCDE triangle (grey arrows) or ABC correction (orange) is expected to take place.
4. The wave 4 (grey) remains likely if price action stays above the 50% Fib.
5. Strong bearish price action below 104.70 places the uptrend on a serious hold.

The main targets are located at 106, 107, and 107.50.

Good trading,

Chris Svorcik

The analysis has been done with the indicators and template from the SWAT method (simple wave analysis and trading). For more daily technical and wave analysis and updates, sign-up to our newsletter

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