USDJPY counter trend might drag prices to 105.00/104.00

Technical Analysis:

USDJPY seems to have completed its first impulse wave at a larger degree after printing highs at 106.22 marks over the last week. As labeled on the 4H chart here, the rally between 102.59 and 106.22 is marked as 1 through 5, completing the impulse structure.
Ideally, an impulse wave is followed by a corrective structure in the opposite direction. It is labeled as A-B-C on the chart here. If you notice price action post 106.22 highs, USDJPY has managed to terminate Waves A and B around 104.92 and 106.13 respectively.
If the above structure unfolds accordingly, USDJPY might be setting up for a drop towards 105.00 at least, as Wave C begins to unfold. If the drop resumes from here, it could be a standard flat correction. Alternately if prices push through 106.22 before reversing, it could be an expanded flat.
Also, note that prices might find support around Fibonacci 0.50 or 0.618 retracements of the entire rally between 102.59 and 106.22 respectively. The probability remains high for a drop-through 104.00, which is the 0.618 retracement as highlighted here.
If the above is correct, USDJPY might resume a larger degree Wave (3) higher towards 109.00 and 110.00 levels, going forward. Potential remains for a push above 111.75 levels, the March 2020 highs, to complete the structure.
USDJPY bears are expected to remain in control until prices stay below 106.22 marks and drag lower towards 104.00 in the next few trading sessions. Bulls might remain inclined to take control thereafter, and push higher through 109.00 at least.

Prepared by

Finacademy Technical Team