USD/JPY dropped to 108.26 last week but recovered ahead of 108.12 support. As the pair is staying below 110.94 resistance, near term outlook remains bearish. Initial bias stays neutral this week first. On the downside, below 109.53 minor support will turn bias to the downside for 108.12 support first. Firm break of 108.12 support will resume the whole corrective decline from 118.65. In that case, USD/JPY will target 61.8% retracement of 98.97 to 118.65 at 106.48. Nonetheless, considering bullish convergence condition in 4 hour MACD, break of 110.94 will indicate near term reversal and bring stronger rebound back towards 114.49 resistance.
In the bigger picture, the corrective structure of the fall from 118.65 suggests that rise from 98.97 is not completed yet. Break of 118.65 will target a test on 125.85 high. At this point, it’s uncertain whether rise from 98.97 is resuming the long term up trend from 75.56, or it’s a leg in the consolidation from 125.85. Hence, we’ll be cautious on topping as it approaches 125.85. If fall from 118.65 extends lower, downside should be contained by 61.8% retracement of 98.97 to 118.65 at 106.48 and bring rebound.
In the long term picture, the rise from 75.56 long term bottom to 125.85 top is viewed as an impulsive move. Price actions from 125.85 are seen as a corrective move which could still extend. But, up trend from 75.56 is expected to resume at a later stage for above 135.20/147.68 resistance zone.
