Search ForexCrunch

USDJPY reversed lower in the past 48 hours from a new high printed above 90 figure. Notice that the pair extended slightly through the impulse channel support line (connected from blue wave three and four) and is now testing levels of 87.80 support.USD JPY Daily Chart Elliott Wave Analysis January 23 2013

Typically, the former wave four will be an ideal zone for a continuation of a larger trend, which in our case would be to the upside. However, a decline from 90.26 was made only in one leg that can be counted impulsively, which means that the pair will most-likely extend even deeper in black wave 4 since we need three waves of decline, because that’s the minimum structure of a corrective price action.

The next thing is that broken trend-line will also turn in to a resistance which could happen in minor wave (b) pull-back to 89.30 and cause a new sell-off in wave (c) of 4. With that said, we see room for further USDJPY weakness towards 86.80 while pair is capped below 90.26.

The larger daily picture for USDJPY also suggests that a deeper pull-back is underway after the pair completed five waves up in wave 3 with bearish divergence at the top.USD JPY 4 hour Chart Elliott Wave Analysis January 23 2013

Get more analysis and Elliott Wave forecasts directly from . Get free access now through 7-Day Trial Offer.

You can also follow us on twitter @ewforecast