USDJPY Flashback Update: USDJPY Turns Lower Again As 160 Resistance Holds

We discussed USDJPY back on August 6, when the pair plunged sharply from the 164 area following BOJ intervention signals, suggesting that an important top could already be in place. Since then, the bearish scenario has continued to develop as anticipated. CHECK IT HERE

USDJPY has turned quite aggressively to the downside this summer on BoJ intervention signals, with a very sharp decline from 164. Given the strength and speed of the move, we assumed that an important top was already in place. That view was confirmed once price broke below the trendline support extending from the triangle in the previous bullish trend.

The market then stabilized and recovered from the 155 area, completing what can be viewed as a five-wave bearish decline into wave A/1. However, the subsequent recovery stalled near the 160 resistance area, creating what appears to be an ABC corrective recovery. From there, USDJPY has seen fresh selling pressure, and a daily close back below the trendline further supports the bearish structure and suggests that the next leg lower could be underway.

The yen is also receiving fundamental support from increasingly hawkish expectations surrounding the Bank of Japan. Recent BOJ commentary has strengthened expectations for further rate hikes, while markets are pricing in a faster pace of monetary tightening. This is helping the JPY strengthen against the US dollar and adds further support to the bearish USDJPY outlook.

From an Elliott Wave perspective, the current structure remains particularly interesting: a five-wave decline from the 164 area appears to have been followed by an ABC corrective recovery toward 160. If this interpretation is correct, the correction may now be complete, opening the door for another impulsive move lower and a retest of the 155.22 area.