Last week, USDJPY topped close to 120.50 and has been trading below this mark ever since. According to the bigger picture, 120.50 should be the peak of wave D of a triangle correction. This means we are currently in wave E of the pattern. Those, familiar with the Elliott Wave Principle, know that in a triangle, each wave consists of three smaller waves. Let’s check the 30-minute chart to see which stage of the three-wave sequence is currently developing.
As visible, the decline from the end of wave D to 118.50 could be counted as a five-wave impulse, labeled (a). The price swings after it seem to have formed an expanding triangle in wave (b) position. If this is the correct count, wave (c) could force USDJPY to decline further, probably to the 117 area. That is the zone, where we will be looking for the end of wave E and a reversal to the upside. The invalidation level for this short-term bearish scenario is at the start of wave (a).