USDJPY faces resistance around 114.00-50 zone

Technical Analysis:

USDJPY might push through 114.00-50 zone before hitting resistance and reversing lower. The currency has potential to drop through 109.00 mark in the next several weeks. Bottom line for the bearish scenario to remain valid is that prices should stay below 115.52 mark.

USDJPY has carved a potential top around 115.52 mark over the last week. The currency has reversed lower toward 112.50 thereafter, subdividing into five waves. The above impulse drop is marked as potential Wave 1 on the 4H chart here.

Ideally, an impulse is followed by a corrective wave in the opposite direction. The subsequent rally between 112.50 and 113.95 has unfolded in three waves, carving as a standard flat. Please note that wave c of the above flat might reach 114.00-50 zone before terminating.

Structurally, USDJPY bears have carved Waves 1 and potential 2 around 112.50 and 114.00 levels respectively. If the above structure holds well, prices would stay below 115.52 and bears will be back in control from here soon dragging lower toward 109.00 as Wave 3 begins to unfold.

Traders might be inclined to initiate fresh short positions around 114.00-40 zone with risk above 115.60 at least. Watch out for a break below 112.50 for prices to accelerate further.

Prepared by

Finacademy Technical Team