Overview: Elliott Wave Perspective
The USD/JPY pair is presenting an exciting long setup based on Elliott Wave principles. After finding support at 153.72, the pair has been consolidating within a well-structured 5-wave impulsive framework. Currently, the price action indicates we are in the midst of a 5th wave move, which could potentially drive the pair to a target at 156.55.
What makes this setup particularly compelling is the alternation between corrective waves: Wave 2 unfolded as a Zigzag, while Wave 4 is forming an Expanded Flat. This alternation strengthens the probability of the Elliott Wave structure playing out as expected. Here's a detailed breakdown of the analysis:
Wave Analysis Breakdown
1. Wave 1
Start: 153.72
End: 154.72
Wave 1 was a leading diagonal, establishing the base for the ongoing 5-wave structure. The clean price action during this wave confirmed bullish momentum entering the market.
2. Wave 2 (Zigzag Correction)
Start: 154.73
End: 154.50
Wave 2 corrected a textbook Zigzag pattern (A-B-C), retracing approximately 61.8% of Wave 1, which is typical for a corrective wave of this nature. This wave also respected Fibonacci retracement levels, providing strong support at 153.72, coinciding with a prior key level.
3. Wave 3
Start: 154.50
End: 155.94
Wave 3 unfolded as a strong impulsive wave, which aligns with Fibonacci projection guidelines. This wave demonstrated clear bullish continuation, further confirming the impulsive nature of the structure.
4. Wave 4 (Expanded Flat)
Start: 156.00
A leg: Decline to 155.985
B leg: Spike back to 156.30
C leg: Decline to 155.20 (potential low)
Wave 4 is currently developing as an Expanded Flat, characterized by the B wave overshooting the high of Wave 3 before the C wave retraced below the end of Wave A. This expanded flat pattern introduces the element of alternation when compared to the simpler Zigzag seen in Wave 2.
5. Wave 5 (Projected Target: 156.55)
Start: ~155.20
Wave 5 is expected to rally toward a Fibonacci extension target of 156.55, based on the following confluences:
61.8% Fibonacci extension of Wave 1-3 projected from Wave 4.
Strong psychological resistance at 156.50-156.60, where prior resistance aligns with our technical target.
Momentum indicators suggest bullish continuation, with RSI bouncing from oversold levels and MACD beginning to cross bullishly on the 4-hour chart.
Key Supporting Factors
Alternation Principle
The corrective structures of Waves 2 and 4 follow the alternation guideline:
Wave 2 = Zigzag (sharp, simple correction).
Wave 4 = Expanded Flat (complex correction with deeper retracement).
Fibonacci Confluence
Wave 4 found support at the 50% retracement of Wave 3, near 155.20, strengthening the case for a bullish continuation.
Wave 5 projection aligns with the 61.8% extension level.
Market Sentiment
The broader USD/JPY trend remains bullish, supported by strong USD demand amid rising Treasury yields.
Any dips during Wave 4 consolidation have been met with buying interest, signaling bullish conviction.
Trade Plan: Long Position on USD/JPY
Entry
Consider entering long near the 155.20- 155.50 zone, which aligns with Wave 4 support levels and the lower boundary of the expanded flat.
Stop Loss
Place a stop loss below 155.05, just beneath the Wave 4 low. This ensures protection against invalidation of the bullish Elliott Wave structure.
Target
Primary Target: 156.55 (Wave 5 projection).
Secondary Target (if bullish extension occurs): 157.00.
Alternate Scenario: Bearish Breakdown
If the 154.72 level is breached, this would invalidate the current Elliott Wave count. , However, as long as the pair holds above 154.70, the bullish outlook remains intact.
Conclusion
The USD/JPY pair presents a high-probability long setup, driven by a clear Elliott Wave structure. With Wave 4 completing as an Expanded Flat and strong Fibonacci confluences supporting a bullish Wave 5 move, a rally to 156.55 appears likely. Traders should remain vigilant, using proper risk management while monitoring price action near critical levels.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.