USD/JPY: A Possible Reversal Elliott Wave Pattern Requires a Catalyst

If you watched our FACE show yesterday, June 26th, you would have heard Blake and me discussing USD/JPY. As you may be aware, the pair has experienced an upward trend, surpassing the 160.22 mark this week, which was the previous high in 2024.

There is currently a bullish market trend underway, and it is possible that there may be some additional gains in the near future. Nevertheless, Japan has raised concerns regarding the current weakness of the Japanese Yen, which may result in potential intervention threats, causing volatility in this pair throughout the summer. There is a possibility that Japan could take action, potentially leading to a significant change in the pair’s direction, particularly if they receive backing from other nations.

Looking at the daily chart, it appears that USD/JPY is potentially forming a wedge pattern from an Elliott Wave perspective. This wedge pattern in Elliott Wave analysis is often interpreted as an ending diagonal, which is considered a significant reversal pattern. The fifth wave appears to be nearing its completion, although there is a possibility of a slight upward extension towards 162, and potentially even 164, reaching the upper trend line resistance in the near term. Nevertheless, it is important to keep an eye on this pattern for any possible changes in the near future.Daily Chart for USD/JPY

Although the exact cause of a potential turning point is uncertain, it is possible that Japan’s intervention could play a role. However, typically, such actions only have a short-term effect. In order to see a significant shift in the pair’s direction, it would require both intervention and a decline in the value of the US dollar, accompanied by lower yields in the United States due to a more cautious stance from the Federal Reserve. At the same time, the Bank of Japan would need to be considering raising interest rates.

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