USDJPY has dropped to interim support at 106.70/80 levels as the US Dollar reversed across the board yesterday. The currency trades around 106.84 levels for now and bulls might be preparing to rally towards 108.00/30 at least, before hitting resistance.
USDJPY potential wave counts are as follows: The currency had dropped from 112.22 highs through 101.18 lows during Feb-March 2020. It was an impulse wave labelled as Wave (1) of a larger degree (not seen on the 4H chart presented here).
The subsequent rally was corrective, and managed to terminate at 111.75, which has been labelled as potential Wave (2). Since then, a larger degree Wave (3) might be underway, and is expected to terminate below 101.18, going forward.
Going further, the probable lower degree wave counts presented are as follows: The drop between 111.75 through 106.00 could be labelled as Wave 1. The rally thereafter reached up to fibonacci 0.618 retracement around 109.85, which is potential Wave 2.
If the above counts hold well, USDJPY should remain below 109.85 and continue lower towards 101.18 and further. If we look at the price action since 109.85 interim resistance, the currency has managed to drop to 106.00 and drifted sideways since then.
The recent boundary in focus is between 109.85 and 106.00 respectively. Also, the fibonacci 0.618 retracement is seen around 108.00/30 levels. Traders might remain poised to initiate fresh short positions around 108.00/30, with stops above 109.85 respectively.
Technical Analysis Team
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