USDJPY With Several Evidences For A Potential Bottom Formation

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FX:USDJPY   U.S. Dollar / Japanese Yen
Hello traders!

Today we will talk about weekly USDJPY chart and we will show you many evidences for a potential bottom formation.

Well, for the begining let's talk about wave structures from Elliott Wave perspective. USDJPY is in a downtrend since March, but the wave structure is slow, choppy and overlapped which we see it as a complex corrective W-X-Y decline and we know that once corrections fully unfolds, we can expect a reversal.

The next very important evidence is an ending diagonal (wedge) pattern placed in third leg Y. The ending diagonal is a special type of wave that occurs in wave 5 of an impulse, or wave C/Y of a correction. This wave often occurs when the preceding move of the trend has gone too far, too fast and has run out of steam. An ending diagonal pattern is a type of pattern that can occur at the completion of a strong move. It reflects a “calming” of the market sentiment such that price still moves generally in the direction of the larger move, but not strongly enough to produce an impulsive wave. Ending diagonals consist of five waves, labeled 1-2-3-4-5, where each wave subdivides into three legs. Waves 1 and 4 overlap in price, while wave 3 can not be the shortest amongst waves 1, 3 and 5.
The reason why they are so interesting is because they are indicating a reversal, usually a strong one.

The next interesting evidence is that we are already seeing bounce and recovery with quite big weekly candlestick, completely covered the previous one, called bullish engulfing candlestick formation which also suggests a bullish reversal from the lows.

If we also consider current break above strong weekly trendline, then with so many evidences, we can easily confirm a potential bottom and bullish reversal.

Trade well!
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Disclosure: Please be informed that information we provide is NOT a trading recommendation or investment advice. All of our work is for educational purposes only.
USDJPY with daily morning star candlestick formation, so if we see a close above 104 today, then we can expect more upside next week.

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