The USDJPY has fallen nearly 200 pips since Thursday morning after testing a resisting trendline that dates to June. This price action has many believing that the downtrend that began at 124.13 is back underway. However, our interpretation of the price pattern suggests that a rally towards 115.00 is still very much a possibility.
The daily chart shows the entire decline from the June high of 124.13. Our favored count treats the decline as a series of 1st and 2nd waves. This remains the favored count as long as price is below 117.93. The USDJPY pierced the confluence of the 61.8% of 117.93-107.20 / trendline drawn off of the June and October highs and has rolled over. However, we expect a test of 115.00 and maybe even the 78.6% of 117.93-107.20 at 115.63. The intraday chart shows why.
Wave 2 of larger 3 is unfolding as an A-B-C zigzag. In a zigzag, waves A and C are both 5 wave impulses. In order for wave C of this advance to be in 5 waves, the USDJPY needs to push through 114.66. In other words, the recent decline is just a small wave iv; not the beginning of the larger decline. Support should be strong in this area, which is the previous 4th wave as well as the 50%-38.2% of 110.48-114.66 at 112.57/113.07.