USDJPY might have carved a meaningful top around 109.85 levels, and prices are expected to remain in control of bears going further. The downside projections remain below 101.50 levels, provided 109.85 resistance holds well.
The larger degree wave counts for USDJPY are as follows. The drop from 112.22 highs towards 101.18 can be considered as a bearish breakout of the former triangle consolidation (not seen here). Being an impulse drop, it has been marked as Wave (1) of a larger degree (not shown on the chart).
An impulse drop is ideally followed by a corrective rally and USDJPY followed the guideline by rallying towards 111.75 mark, labelled as Wave (2). If the above larger degree counts are correct, USDJPY has been unfolding a larger degree Wave (3) since 111.75 highs.
Going further, the drop from 111.75 through 106.00 could be labelled as a lower degree Wave 1 as seen on the chart view. The subsequent rally was corrective, and reached up to 109.85 handle, which was fibonacci 0.618 retracement of Wave 1, labelled as Wave 2 here.
If the above lower degree counts are correct, a Wave 3 should be underway below 106.00 handle. For the above wave structure to hold true, USDJPY must stay below 109.85 handle. The recent boundary which is being retraced is between 109.85 and 106.00 respectively.
USDJPY has reached just over the 108.00 mark and is seen to be pulling back right now. Please note that potential remains for a push towards 108.30 levels, which is fibonacci 0.618 retracement of the above drop, before giving in to bears again.
Most traders might be waiting to initiate fresh short positions around 108.30 levels, with risk above 109.85 mark and potential targets below 101.00 handle. Only a break above 109.85 would change the above bearish structure.
Technical Analysis Team
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