Potential exists for a USD/JPY reversal and strength up toward 88.00-90.00 before the longer term downtrend resumes.
Monthly USDJPY Bars
CHART 1
Prepared by Jamie Saettele
For years, I’ve focused on the impulsive nature of the USD/JPY decline since the 1970s and expectations have been for a drop below the all-time low of 79.75 (1995) in a fifth wave. With just 400 pips to go until that level, it would be foolish to alter this bias now. What’s more, it is likely that a fifth wave break from a 12 year fourth wave triangle extends (70 or lower?).
Weekly USDJPY Bars
CHART 2
Prepared by Jamie Saettele
The problem with the decline from the 2007 wave four high is that it is a mess. Fifth waves, especially after significant moves in the prior third wave (see previous chart), sometimes unfold as ending diagonals. That is, the decline is overlapping and consisting of three wave movements. Such is the case here. There is not a clear count from the 2007 high yet…so it is unlikely that the decline is complete (if you can’t count, then it’s not over). A long term trend line has held as resistance and the long term trend is down against 95.00.
Daily USDJPY Bars
CHART 3
Prepared by Jamie Saettele
Zooming in to the daily, we see that RSI divergence warns of a near term reversal. There are also intermarket divergences as the only yen crosses below their 2008 lows are the USD/JPY and EUR/JPY (the GBP/JPY, AUD/JPY, NZD/JPY and CAD/JPY are above their 2008 lows). These divergences WARN of a reversal. Trading above 85.25 is required for confirmation.
In summary, potential exists for a USD/JPY reversal and strength up towards 88.00-90.00 before the longer term downtrend resumes.