The weekly USDJPY chart shows clear five waves up on the weekly chart with a triangle in the wave (4) position. So, at least a correction of that entire rally is due. The idea, based on this context, is to catch a good chunk of the wave (C) move to a roughly 38.2% retracement level of the entire impulse, or to the support of the previous fourth wave of one lesser degree.
We’ve likely completed wave (B) or a very significant portion of (B). If wave (C) down is on the way now, then a wave 3 decline is due to come now. (C) may reach the mid-96 area, which is prior fourth wave support, and wave (C) would equal wave (A) at 99.45 which is within the range of our weekly timeframe trade idea.
Shorter term, the entire rally from the low on Feb 3rd, channels in a corrective manner. The decline from the high near 104 on Apr 4 looks like wave 1 of (C). The bounce from the April low is likely wave (2), where USD/JPY experienced 7 up days in a row, and retraced 50% of the decline from 104.129. Today’s weakness looks like the resumption of the broader decline.
On the negative side the overall ranging nature of the market speaks against a short trade this close to the bottom of the sideways structure. We enter this short position on the USD/JPY with a tight risk management as most of the break out attempts in a trading range will fail. If the market reaches between the bottom channel line support (101.70) and the lower end of the trading range (101-ish) but can’t get a decent follow through there, be prepared to close the position because JPY might stay for another few months in a more complex (B) sideways to up structure. In fact we suggest to use a breakeven trailing stop when the market showing strength between 101.70 and 101.
The time zone we reference on our charts is Pacific Standard Time. Therefore, the U.S. cash market opens at 6:30 AM PST and closes at 1:00 PM PST.