It establishes a sequence of higher highs and higher lows

• USD/JPY has reversed trend and is now bullish in the short term.
• Although he completed an abc patch, he failed to drop later, instead dropping higher.

USD/JPY has likely reversed its short-term downtrend and is now trending higher after setting a new sequence of higher highs and lows. Given that “the trend is your friend”, this suggests that there is a short-term bullish bias.

USD/JPY 4 hour chart

The trend reversal comes after the pair continued to rise despite completing an abc correction between August 5 and 7. Normally, the completion of the abc correction would have been a signal that the pullback was over and the dominant downtrend was about to resume. However, in the case of USD/JPY, the pair failed to move lower and instead traded sideways before decisively declining on August 15.

The break above the top of wave c indicates that the short-term trend is now likely bullish and therefore more likely than not to continue to rise. The 100-period simple moving average (blue) is currently capping gains, but a close above it would likely confirm a higher continuation to a target of 150.90 (August 1 high), followed by 151.94 ( July 25 low) and then maybe 155.22 (July 30 swing high).