Hello Forex Traders,
A very interesting trade opportunity is looming around the corner. Soon the USDJPY could ready for an uptrend continuation. And the move could entail hundreds, if not 1,000+ pip, movements, so grab a cup of coffee and a pen plus paper, because this is a setup nobody wants to miss out on!
Before we dive into that, the trading month of September has closed and the new trading month of October has arrived. Make sure to review your trading journals of September, learn from the mistakes made, and implement the new wisdom with even better accuracy. I wish everyone Good and Successful Trading.
For those who want to read more about the EURUSD and GBPUSD, check out yesterday’s analysis here.
USDJPY MEGA TREND
Obviously the uptrend on the USDJPY was very impulsive and explosive. Starting in October 2012 the trend lasted 7 (!) months before it topped out well over the 100 mark making a 2,700 pips dash. The trend started with a deep pullback (as often the case) to the 786 Fib after correcting an earlier first impulse which last 2 months in February and March 2012 (see monthly and weekly chart).
Here are in my opinion the most interesting observations:
1) Price is making lower highs and higher lows on weekly charts
2) Price is thus in a corrective pattern, a contracting wedge
3) Price bounced off a 382 Fibonacci retracement
4) A 382 bounce and corrective pattern are typical characteristics of a wave 4
5) A wave 4 pattern makes perfect sense at this point in time as the 7 month uptrend is most likely a wave 3
6) The Oscillator is almost back at the zero line, indicating that the retracement is (almost) ready
Let us now zoom into the contracting triangle to see when it could be completed.
TRIANGLE ENDING SOON
When zooming into the daily chart, the lower highs and higher lows and the subsequent contracting triangle become simple to recognize. When labeling the internal sub waves of the triangle and when connecting the tops and bottoms with trend lines, the following conclusion can be made:
The USDJPY uptrend might continue at any day now.
1) Currently price seems to be making a wave E, which is the last leg within a triangle
2) When connecting the waves A and C and waves B and D, the trend lines confirm the triangle and currently price is at the bottom of the triangle
The contracting triangle would be invalidated if price breaches through the bottom of wave C at 95.80. Above that 95.80 level, price could in fact turn at any spot. It does not have to bounce at the bottom of the trend line but it surely could.
If price however were to break through the 95.80 wave C bottom, then the alternative scenario is marked with the letters colored in orange: the first down move is then a wave A, the remainder is a Wave B and one more down move would be the wave C. Downside target is the 500 Fib retracement at 90.40.
The confirmation of the break of the triangle is when price breaks above:
1) The top of the triangle trend line
2) The weekly fractal at 100.70
Once that occurs the breakout for uptrend continuation is in place and the -0.272 target at 111 the main number one target for the USDJPY.
What is your opinion? Is the USDJPY ready for the uptrend? If so, what is your target? Let us know down below!
Thanks for sharing this article and Good Trading!
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