USD/JPY Elliott Wave: Rebound eyes 160.00–160.40, then watch the pullback

USD/JPY has rebounded strongly and broken above the trend line resistance connected from the July highs. The pair is trading around 158.09, and I think that, at least in the short term, it can stay in recovery mode.

However, the upside could become limited around 160.00–160.40. This is not only an important technical resistance area but also a major psychological zone, and one the Bank of Japan will likely be watching closely.

If this area is retested, we could still see a fresh sell-off into a higher-degree wave C within the large triangle on my primary daily wave count. For that scenario to be confirmed, though, I would need to see an impulsive five-wave decline from around 160.40.

If a pullback from that area unfolds in only three waves, meaning a slower corrective structure, it could instead be subwave two within the bullish interpretation. That would suggest the correction from the July highs is already complete.

Japan's national CPI for September is out on Friday, October 23, at 8:30 Tokyo time (01:30 CEST). With the BoJ meeting on October 29–30, inflation data could add some volatility to yen pairs, especially this close to resistance.

Bottom line, USDJPY appears to have room for more upside towards 160.00–160.40, but once that area is reached, I will be watching the structure of the next pullback very closely.

GH