In our previous forecast on USDJPY we suggested that the rally to 104.11, despite being quite strong, should be only a correction of the larger downtrend. In our intraday section we even gave you an exact entry point for the trade, which went according to plan with USDJPY falling by 280 pips to 101.31. Currently in the 102.60 zone, it may be the right time to look at the charts again.
As shown, the drop-off to 101.30 was in five waves, which gives us a confirmation that the downtrend has resumed. After every five waves a correction should follow. In this case, the correction looks like a double zig-zag, labeled w-x-y. After every correction, the larger trend should resume. That is why we expect another decline in wave 3 of “(3)/C”. This count would be invalidated, if prices go back to 104.11, but as long as that level holds, we will remain bearish on USDJPY. Third waves are sharp and fast, they are a gift to traders. This should be the case here as well, especially if wave “y” of “2” ends with an ending diagonal. If this is the correct count, prices under 100.70 should be easily reached, and if we consider the big picture outlook – much lower.