Be careful with USD/JPY

USD/JPY rose significantly yesterday after the FOMC reports and during Janet Yellen’s speech. Does that post-news strength provide enough of a reason to start buying? Considering that our previous analysis is still valid, we think you ought to be careful with USD/JPY. Let’s see how it has been developing by now.

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To make that count more reliable we have to go deeper and see if the rise from yesterday is corrective and if the decline before it is impulsive. In order to do that we have to go to the 30 minute chart of USD/JPY.

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As shown, the drop-off from 103.75 to 101.19 could be counted as an impulsive wave and that strong rise from yesterday seems to be wave C of a flat correction. If we have to look for a reversal soon, we have to pay attention to 102.80. The extended fifth wave would be completely retraced and there is a 61.8% key Fibonacci level. This wave count would become invalid, if prices reach above 103.80. Since we are expecting wave 3 of (3)/C, our first legitimate target is 98.60, which gives us a risk/reward ratio of 4,2:1.

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