USDJPY might be preparing to rally towards 108.30/40 levels, before reversing lower again. The currency had slipped below the 107.00 handle yesterday but bulls remain poised to push higher over the short term. The 106.00 interim support should hold for above structure to remain intact.
The wave structure since 111.75 is suggesting that USDJPY might have carved Waves A and B of a corrective drop A-B-C lower. Wave A potential termination was seen towards 106.00 while Wave B rallied through 109.85, the fibonacci 0.618 retracement of Wave A.
USDJPY needs to stay below 109.85 levels, to keep the above structure intact. A break above 109.85 would indicate that bulls are back in control and the currency is heading further north towards 112.22 levels, going further.
In the immediate short term, probability remains for a push higher towards 108.30/40 at least. Please note that the fibonacci 0.618 retracement of recent drop between 109.85 and 106.00 is also passing through 108.30. High probability remains for a bearish reversal if prices manage to reach there.
Alternately, if prices drop below 106.00 mark, USDJPY would be pushing further lower towards 105.00 at least, before finding some support. Probabilities for the alternate count remains less though. In the short term, a sharp rally towards 108.30 remains possible.
The short term wave counts suggests USDJPY might have carved lower degree wave I around 106.00 mark. It might terminate wave ii around 108.30, before proceeding lower towards 105.00 as Wave iii unfolds.
Long against 106.00 targeting 108.30/40 in the short term.
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