Yesterday USD/JPY continued moving north all day long, even during part of the Asian session, and eventually reached the 104.633 level.
The sharp move to the upside stopped at the trendline that forms a channel on the daily time frame (the red lines) with height of about 480 pips.
On the four-hour time frame we can see that the last move to the upside consists of five waves which fit all the conditions to be an impulse of five waves of the Elliott Wave Theory, so the drop that followed was logical. However, just because we can observe five impulse waves does not mean that this is the beginning of an overall impulse move to the upside. During many corrections the corrective waves take the form of an impulse.
Considering that the pair is forming a cycle of corrective waves we can conclude that these five waves are a part of another, more complex formation of corrective waves. We don’t know what waves the pair will form, but I hope there will be more clarity in the near future. What is clear is that at this stage we need to be careful while trading this pair.