USDJPY might be preparing to head towards 110.00 and beyond. The currency has completed an engulfing bullish candlestick pattern on the daily chart yesterday. Bulls might be ready for a potential reversal towards 110.00 and 111.00 going forward.
USDJPY seems to be carving a corrective wave A-B-C at a higher degree. The waves are discussed here; the rally between 101.18 and 111.75 could be seen as Wave (1) or (A). Ideally, an impulse rally would be followed by a corrective drop in the opposite direction.
USDJPY had dropped from 111.75 through 104.20 in 3 waves labelled as A-B-C on the chart above. The termination point can be counted as Wave (2) or (B) of one higher degree. If the above proposed structure is correct, we should witness a rally from here.
USDJPY should stay above 104.20 and ideally above 101.18, while proceeding towards 111.75 levels in the next several weeks. Also note that the currency had bounced off fibonacci 0.618 retracement of the entire rally between 101.18 and 111.75 respectively.
Looking into the lower degree potential wave counts, USDJPY seems to have found support at fibonacci 0.618 retracement of its recent rally between 104.20 and 107.00 respectively. If the above holds, prices should ideally stay above 105.20 levels.
USDJPY might be turning bullish again and targeting above 111.75 in the next several weeks. It remains to be a great candidate to be bought on dips, going further.
Long against 101.18, targeting above 111.75