USDJPY might be preparing to rally towards 111.75 at least, if not higher. The currency is trading around 106.22 levels for now and is expected to remain in control of bulls until it stays above 104.00 interim support. A push through 107.50 would be encouraging for bulls.
USDJPY has been unfolding as a triangle at a larger degree. The drop towards 101.18 could be considered as Wave c within the larger triangle structure. Since then, USDJPY might be working to produce a Wave d higher. The sub waves within Wave d, are explained below.
USDJPY had rallied between 101.18 and 111.71 as the first leg within Wave d of the proposed triangle. The subsequent drop towards 104.20 was corrective and could be the second wave respectively. If the above interpretation holds well, the currency might be setting up for a push above 111.75 to complete the third wave within Wave d of the triangle structure.
Also note that the corrective drop had found support just below the fibonacci 0.618 retracement, seen around 105.20 levels. The bounce from 104.20 levels managed to produce a huge bullish reversal candlestick pattern as well. Ideally, prices should hold above 104.20 levels going further.
Immediate resistance is seen around 107.50 and s break higher would be encouraging to bulls. Furthermore, a push through 109.85 would certainly confirm that bulls are in control and USDJPY is heading towards 111.75 respectively.
USDJPY remains a good candidate to be bought on dips as long as it stays above 104.20 levels. A break below 104.20 might change the structure for the short term but medium term outlook would still remain bullish towards 111.75 levels.
Short against 1.3600, targeting 1.2200