Last Wednesday, the Greenback posted nice gains vs the yen following the Bank of Japan’s (BoJ) decision to hold interest rates at a static -0.1%. Following the announcement, the USD/JPY posted an intraday high of 112.39 before selling off to close the forex week. Now, after a tight Monday session, bearish sentiment is driving rates toward the 111.00 handle.
The USD/JPY Breaks Below Daily Support
In the last four sessions, the USD/JPY has sold off by 100 pips, shattering both the Daily SMA and Bollinger MP. At this point, the next support level up on the daily time frame is the 78% Current Wave Retracement at 111.18.
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Bottom Line: The daily Elliot wave count on the USD/JPY has become a bit dirtier than it was from late-March to mid-April. Rates are now into a deep retracement beneath the Bollinger MP. At this juncture, it appears that the Swing Low of 110.84 is likely to be challenged.
Before that can happen, the 78% Current Wave Retracement (111.18) must be taken out. Until elected, I will have sell orders queued up from beneath today’s low at 111.22. With an initial stop at 111.58, this trade produces 35 pips on a slightly sub-1:1 risk vs reward scenario.
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