- USD/JPY has pulled back after forming a market bottom on August 5.
- The move higher remains corrective, however, further upside could suggest a reversal.
USD/JPY is likely in a down trend on both a short and medium-term basis now. Given “the trend is your friend” this continues to suggest a bearish bias exists over a 6-month period. The long-term trend, however, remains bullish.
USD/JPY 4-hour Chart
Currently the recovery from the August 5 lows looks only corrective in nature. A break below 145.43 would probably indicate the resumption of the dominant downtrend, with the next target at 141.69 (August 5 low). A break beneath that would produce a lower low, confirming the downtrend. Sturdy support at around 140.44, however, is likely to limit further weakness, at least temporarily.
There is a risk the trend is about to change on a short-term basis. A break above the 147.91 August 7 high would bring into doubt the validity of the short-term downtrend and suggest a possible reversal.
The pair has completed a standard abc correction after basing on August 5. A break above the highs of wave “c”, however, might indicate this correction was developing into something bigger, perhaps the start of a new uptrending move. Such a break might lead to a move up to 150.90.
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