The USDJPY spike through 105.86 satisfies minimum expectations for the corrective rally that began at 95.72. The downtrend should be back underway.
It is important to keep the longer term charts (such as monthly and weekly) in your mind for perspective. Our analysis of the USDJPY monthly chart indicates to us that a drop below 81 is still probable. A picture perfect 5 wave decline appears to be unfolding from the 1971 high in the USDJPY. Wave 3 of the decline was extended and divides perfectly into 5 waves itself. Wave 2 was a sharp zigzag correction and wave 4 a triangle (a-b-c-d-e); which satisfies the guideline of alternation (if wave 2 is sharp, then wave 4 should be shallow and vice versa). If this pattern is correct, then wave 5 is underway now and would not be considered complete until the USDJPY drops below 81.12.
The advance from the 95.72 low is corrective (a complex correction to be specific). The rally consists of overlapping 3 wave structures that are connected by X waves. The result is a triple combination correction; labeled W-X-Y-X-Z. The spike through 105.70 satisfies minimum expectations for wave Z. Even shorter term, the USDJPY pattern indicates that a top is in place, so a bearish bias is warranted against 105.86.
