the USD/JPY has made a bullish continuation towards the -61.8% Fibonacci target – as expected in our previous UJ Elliott Wave analysis.
The bearish 4 hour candlestick pattern, however, is indicating a pause within the uptrend. What can traders expect next? Let’s review.
The USD/JPY seems to have completed a bullish wave 3 (grey). The strong and lengthy push up for 200+ pips from 103.50 to 105.75 is typical for such an impulsive wave 3.
The recent bearish engulfing candlestick pattern, however, could signal the end of the bullish momentum… and the start of a bearish correction. Such a pullback is likely to be a choppy wave 4 (grey).
These are the main patterns to keep in mind for wave 4:
But keep this mind: a deeper pullback below the support trend line (green) and 61.8% Fibonacci retracement level places the uptrend on serious hold (yellow button). Also, a break below the 78.6% Fib invalidates it (red circle).
On the 1 hour chart, the 5 waves (green) of wave 3 and 5 (orange) become better visible.
The current bearish breakout below the 21 ema zone and the support trendline (dotted green) is the first one since 27 January.
What does this mean?
The main targets are located at 106, 107, and 107.50.