Short term
/
Sell
Trade view / 08 February 2018 at 23:52 GMT

Watch for corrective consolidation in USDJPY to give way soon

Managing Director / Technical Research Limited
New Zealand
Instrument: USDJPY
Price target: ¥108.62
Market price: ¥106.86
Background

With little economic data of significance out of the US or Japan today, USDJPY will likely track the US stock market's CFDs/futures. Having closed close it its low at 2582 in standard trading hours in New York, S&P 500 futures are staging a very modest recovery in the Asian session (to around 2590). The low seen during the panic of a couple of days ago was 2530.
 
Meanwhile, despite all the hype about a selloff in US bonds, the yield on the 10-year, at 2.83%, looks to be a long way from the psychological 3% level, and it is unlikely to get there while a risk-off mood is driving stocks. For the USD to rally, we would need the climb in bond yields to resume and the yield curve to continue steepening.

Management and risk description

From an Elliott Wave perspective, I am interpreting a large and complex developing 3-Wave corrective structure (from last January’s peak of ¥118.60), with Wave equality projecting a sell-off toward the 103.45 level over coming weeks.

In the term short term, contracting ¥108.35 to ¥110.45 corrective consolidation appears mature and there is heightened risk of an imminent (and decisive) break below the ¥108.50 support level, to herald a probable selloff back to ¥107.35 (which was last year’s low), en route to ¥106.90/¥106.60 over coming days.

Parameters

From an Elliott Wave perspective, I am interpreting a large and complex developing 3-Wave corrective structure (from last January’s peak of ¥118.60), with Wave equality projecting a sell-off toward the ¥103.45 level over coming weeks.

In the term short term, contracting ¥108.35 – ¥110.45 corrective consolidation appears mature and there is heightened risk of an imminent (and decisive break) below the ¥108.50 support level, to herald a probable sell-off back to ¥107.35 (last year’s low), en route to ¥106.90/¥106.60 over coming days.

Entry: USD is seen as a sell on a break of ¥108.35.

Stop: just above ¥108.90, initially.

Target: ¥106.86.

Time horizon: allow several days for target to be met.

Daily USDJPY chart (click to expand)
USDJPY daily chart
Source: ThomsonReuters

Weekly USDJPY chart (click to expand)
USDJPY weekly chart

















Source: ThomsonReuters. Create your own charts with SaxoTrader; click here to learn more

For more on forex, click here.

— Edited by Robert Ryan

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10 February
Morris Morris
Max the pattern on the 18 Jan article daily chart is it invalidated by this one? You had sHs there and now?
10 February
Max McKegg Max McKegg
Morris, below 107.35 would invalidate that "potential" Inv.H+S structure
12 February
Morris Morris
Ok! Thanks

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