FX.co ★ USD/JPY wave analysis for January 16, 2013

USD/JPY Elliott Wave
For the last few days the USD/JPY pair was trading downward, corrective wave (A) (coloured red) of the bigger 4 wave (coloured purple) was developing. Yesterday during the early Asian session we could observe descending movement from 89.02 toward the 88.26 level and we can consider this move as the end of the 3 sub-wave of the bigger (A) wave (coloured red). Therefore, during the New York session after this major pair found resistance around 88.90 level we could observe continuation of the Asian bearish move that bring price to the 87.93 level. At the moment the USD/JPY pair is trading around 88.07 level and we expect to see the price higher when development of the (B) wave (coloured red) starts. In accordance with our wave rules and taking into account that the wave B should retrace 61.8% of the wave A, we can define the potential targets with measuring wave A with take profit at 88.94 (61.8% of wave A). To reduce the risk, we can use support at 87.54 level as stop loss.

Support and Resistance
(S3) 87.54 (S2) 88.06 (S1) 88.37 (PP) 88.89 (R1) 89.41 (R2) 89.72 (R3) 90.24

Trading forecast
Proceeding from Elliott Wave rules today, the trend is expected to begin the upward movement. That is why long positions at level 88.15 with stop loss 87.54 and take profit at 88.94 are recommended.