The USD/JPY is a building a large consolidation pattern but a bearish breakout seems the most likely.
In this article, we are looking for USD/JPY opportunities and scenarios.
Let’s start with analyzing Elliott Waves. USD/JPY seems to be in wave 4 and showing potential for bearish momentum to finish wave 5.
The wave 4 correction typically does not exceed 50% Fibonacci level of wave 3, which means that wave 4 is in a range now. Price needs to break below support to confirm a bearish wave 5.
What is the target? Wave traders know that wave 5 targets are aimed at the wave 3 bottom and -27.2% Fibonacci target.
Price broke below the strong support zone and used that same zone as a resistance for a continuation of the downtrend. Yesterday bearish daily candle also showed an engulfing twin candlestick pattern, which confirms the potential for more downside.
Our analysis is clearly showing a downtrend continuation. Now we can use SWAT to figure out entry, targets, and stops.
Price broke below the 21 EMA. One entry point is a break of the trend, illustrated in the below chart, around 106.764. With strong 4 hour bearish candle targets can be aimed at 105.60, which is the last bottom and the 2nd target is 104.434 at -27.2 Fibonacci level.
And for the stop, we have two options: the first one is a wide stop at 108.204 above the 144 EMA, and the second stop is tight at 107.30.
Important update: unfortunately this analysis was not published early enough due to a publishing delay and the bearish breakout has already occurred. But at least traders can see how wave patterns together with the SWAT logic can provide a dynamic and powerful duo.
Ahmed Darwish Twitter