Bullish Butterfly and Waves on USDJPY?

The USD index has been dropping this year from above 103 to below 100 as uncertainty is creeping in due to deteriorating data and a lack of any progress by Trump on his tax policies. Since the beginning of June, a Wolfe Wave has appeared in USDJPY and has gone through all 5 waves with last extending outside of the wedge. This last two waves of the Wolfe indicator have followed the BC and CD line of the harmonic pattern and both ended at the same level giving the possibility of a reversal area.

Technical traders using only the harmonic pattern would look to go long but when combined with the Wolfe Wave, some traders may look to hold out until the price retraces back into the wedge area to confirm the reversal in trend.

With the USD index near it medium terms lows cautious traders may want to wait for this price reversal because if the USD index breaks to the downside we could see a further depreciation of USDJPY offering a better entry point.

Due to the weakness of USD, traders looking to take this trade will want to place the stop loss close to the outer wedge or for traders looking to enter now the stop loss should be placed below point D.

A take profit can then be placed at the top of the wedge or a trailing stop used.

Happy Trading

Alexander Flood

Technical Analyst


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