USDJPY breaks below initial support around 111.21

Written by Financial Educator

October 4, 2021

USDJPY had rallied through 112.08 high over the last week before reversing sharply lower. Bears remained in control thereafter taking out initial support around 111.21 mark. The currency dropped to 110.90 levels, which is also fibonacci 0.382 retracement of the entire rally between 109.15 and 112.08.

USDJPY completed its Wave (B) triangle consolidation around 109.15 levels and resumed its rally towards 112.08. High probability remains for a larger degree Wave ((C)) termination around 112.08 mark. If the above is correct, bears will continue to remain in control dragging towards 109.15.

A break below 109.15, potential Wave (B) termination, will confirm a bearish reversal towards 105.00 and lower in the next several weeks. Alternatively, the recent rally between 109.15 and 112.08 could be lower degree Wave 1 of (C), which is not shown here.

If the alternate count holds well, USDJPY could drop towards 110.25 in a corrective manner. Also note that fibonacci 0.618 retracement of the above rally is passing through the same zone. Probability for a bullish reversal could be high if prices manage to drop towards 110.00-25 zone.

Either way, traders might be willing to initiate fresh short positions around 111.50-60 mark with a risk above 112.08, in the near term.

The Team

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Financial Educator