USDJPY yet again has dropped through 104.11 lows yesterday. The currency seems to have carved a higher low and is expected to turn towards 106.00 in the near term. A break above 105.00 will confirm that a meaningful bottom is in place around 104.11 and bulls are back in control.
Looking at the recent wave structure, USDJPY might have carved a lower degree Wave 1 between 104.00 and 106.00 a few days earlier. The recent drop to 104.11, could be marked as Wave 2 and if the above holds well, we should witness a sharp Wave 3 rally above 106.00 levels soon.
USDJPY medium term wave structure also indicates bullish outlook. The currency had dropped to 101.18 levels in March before turning/reversing sharply higher. Bulls had managed to print 111.75 highs within a few trading sessions. The rally looks to be Wave (1) or (A) within a bullish structure.
The subsequent drop through 104.00 was corrective A-B-C as labelled on the above chart. Also note that USDJPY found support just below the fibonacci 0.618 retracement seen towards 105.20. If the above structure holds well, prices should stay above 104.00, going forward.
Furthermore, USDJPY should rally towards 111.75 levels in the next several weeks to complete the above bullish structure. Intermediary resistance is seen towards 106.00 levels, followed by 107.00 while support is at 104.00 and 101.18 respectively.
USDJPY remains ideal to be bought on dips until prices stay above 101.18 lows, going further. A break above 106.00 and subsequently 107.00 will instil further confidence on the above bullish setup.
Long against 104.00, target is open.