USD/JPY’s decline from 112.40 resumed last week and reached as low as 107.04. Initial bias stays on the downside this week. With 61.8% retracement of 104.69 to 112.40 at 107.63 taken out, further fall should be seen to retest 104.69 low. On the upside, break of 108.80 resistance is needed to indicate short term bottoming. Otherwise, outlook will remain bearish in case of recovery.
In the bigger picture, decline from 118.65 (Dec 2016) is still in progress, with the pair staying inside long term falling channel. Break of 104.62 will target 100% projection of 118.65 to 104.62 from 114.54 at 100.51. For now, we’d expect strong support above 98.97 (2016 low) to contain downside to bring rebound.
In the long term picture, the rise from 75.56 (2011 low) long term bottom to 125.85 (2015 high) is viewed as an impulsive move, no change in this view. Price actions from 125.85 are seen as a corrective move which could still extend. In case of deeper fall, downside should be contained by 61.8% retracement of 75.56 to 125.85 at 94.77. Up trend from 75.56 is expected to resume at a later stage for above 135.20/147.68 resistance zone.
