After recently completing a Crab Pattern at the 2.24 extension, USDJPY fell back through the purple channel midline to the 1.272 Fib level, where it is staging the backtest of the midline we forecast last week.

While I expect the backtest to be successful, meaning a leg lower is in store, the 部屋に象 is the .618 at 105.58. Note that this is the 61.8% retracement of the 39% crash from the 2007 highs.  It happens to coincide with a number of significant channel lines, so tagging it could be a very big deal.

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The rising wedge (in yellow, above) would easily accommodate such a rally — particularly if the yellow wedge’s lower bound holds over the next couple of days.

If it doesn’t hold, the bottom of the purple channel could quickly come into play with a tag of 99.26 or so by early next week.

From a harmonic standpoint, the key for the red Crab Pattern targeting 105.57 is the ability to hold 100.66.  Point C can be anywhere between 101.57 and 100.67, as long as 100.66 doesn’t break down.

Also, note the potential IH&S setting up that targets the red 1.272/white 2.618 at 104.53 — which leads me to believe we’ll get to the .618 target area via a series of zig zags within the yellow wedge.

GLTA.