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September started with another leg higher in the Japanese yen pairs, and in particular in the USD/JPY one. After the Non-Farm Payrolls report was released last Friday, the USD/JPY consolidated above 140, only to blast higher today.
Currently, it knocks at the 142 door, and bears are in for a rude awakening. Not only that this market is bullish, but the move higher should continue for quite some time.
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Rising wedge trapping bears
It all started during the summer months. More precisely, in July, the JPY pairs crumbled.
The USD/JPY formed a rising wedge formation visible on large timeframes, such as the daily one seen below. A rising wedge pattern is a bearish formation, and traders wait for the price to break below the 2-4 trendline before going short.
But few are aware of the fact that a rising wedge is a tricky pattern. Often enough, the market reverses and trades above its highest point.
When it happens, the market formed a running triangle – a bullish pattern, invalidating the reversal pattern completely.
USD/JPY price forecast after a bullish triangle formation
A running triangle forms at the end of complex corrections. According to the Elliott Waves theory, a complex correction often appears as the second wave in an impulsive structure.
Also, it almost always ends with a triangle – just as below.
In other words, the running pattern ended around 132.50, and that is the place from which a new impulsive structure began. Furthermore, the impulsive structure following a running correction is the extended wave of a larger degree impulsive move.
Put simply, the USD/JPY may look extended here. But this is just the beginning of a bigger, more powerful advance.
To sum up, the bullish run should continue with 133 acting as an invalidation level. Judging by the price action prior to the triangular pattern, the extended wave should easily stretch to 150 and beyond.
Therefore, shorting this market is risky as the path of least resistance remains on the upside.
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Image and article originally from invezz.com. Read the original article here.