- USD/JPY consolidates within a contracting triangle.
- The pair remains bearish so long as it holds below 110.80.
- A break below 108.75 will accelerate the downside.
USDJPY has been broadly consolidating within a contracting triangle since the 108.75 low registered on August 4. The currency pair had dropped towards 109.60, potential wave d, within the triangle.
If the above triangle structure holds well, USD/JPY is pushing higher towards 109.90-110.00 range to terminate wave e of the contracting triangle. Once complete, a sharp bearish reversal could be underway, dragging prices below 108.75.
USD/JPY needs to stay below the 110.80 mark for the above bearish count to remain valid. Also, note that the triangle consolidation resistance line is passing through the 110.30 level at the time of writing. The high probability remains for a bearish bounce if prices manage to reach there.
Furthermore, wave ‘e’ would reach 61.8% Fibonacci retracement of wave ‘c’, as a general guideline. USD/JPY is expected to face resistance around 110.00, which is close to the above retracement as seen on the chart here.
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Overall, USD/JPY is carving out a potential Wave (4) within Wave (C) higher towards the 112.50 mark. The currency is expected to terminate around 108.00 as Wave (4), before resuming its rally to terminate Wave (5) higher. The larger degree wave structure is not seen on the hourly chart presented here.
Alternate count
If larger degree Wave (4) is already terminated around 108.75, USD/JPY would break above 110.80 in the near term. Bulls would remain poised to push towards 112.50 and higher to complete the structure, which began from 101.18 low in March 2020.
Technical levels to watch
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