USD/JPY Wave 4 Pullback After Bullish Wave 3 Pattern

The USD/JPY showed a strong bullish impulse above the 21 emas. Now price action is testing and bouncing at this 21 ema zone.

Will price action be able to continue with the uptrend despite the resistance? Let’s analyse the weekly and 4 hour charts.

Price Charts and Technical Analysis

The USD/JPY has been very impulsive and very bullish since the lower high and breakout above the resistance lines (dotted orange) and 21 ema zone:

1. The momentum is probably a wave 3 (grey).
2. The current pullback is therefore assumed to be a wave 4 (grey).
3. The wave 4 pullback remains valid as long as price action stays above the 50% Fibonacci retracement level.
4. A break below the 50% Fib places it on hold (orange circle) whereas a break below the top of wave 1 (grey) invalidates it (red circle).
5. Price action could build a larger correction (orange arrows) in wave 4 (grey) first before an uptrend continuation is expected (blue arrows).

On the 4 hour chart, price action seems to have completed a bearish ABC (light blue) pullback. This could complete the wave 4 (grey) on its own, but usually waves 4 take longer to complete:

1. Therefore, a bullish ABC (light blue) could occur in wave B (orange).
2. Another decline from the top (orange arrow) could indicate a wave C (orange).
3. There is also a chance of ABCDE (orange) triangle pattern.
4. Eventually the uptrend is expected to take price higher for a higher high (blue arrows).
5. The uptrend could occur sooner if there are bull flag chart patterns (grey arrows) followed by breakouts (green arrows).

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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