USD/JPY Weekly Outlook

USD/JPY's rebound from 95.77 extends further to as high as 105.70 last week, entered into mentioned 104.96/108.59 resistance zone as expected. From a short term angle, initial bias remains on the upside this week as long as 104.54 minor support holds. Further rally is expected to 38.2% retracement of 124.13 to 95.77 at 106.60. On the downside, below 104.54 will turn intraday outlook neutral first. But still, further rally is in favor as long as retreat is contained above 103.16 support.

In the bigger picture, sustained trading above 55 days EMA (now at 103.52) indicates that a medium term bottom is in place after down trend from 124.13 has just met 76.4% retracement of 79.75 to 147.68 at 95.78. Focus is now on 108.59 resistance and break of which will break a series of lower highs, lower lows pattern that started at 124.13 and will confirm that this down trend has completed already. In such case, stronger medium term rebound should then be seen to retest 114.77 resistance first. However, failure below 108.59, followed by break of 100.02 support will firstly indicate rebound from 95.77 has completed. Secondly, it will keep the lower higher, lower lows pattern intact and suggest that down trend from 124.13 is still in force.

In the longer term picture, USD/JPY has broken out of multi-year triangle consolidation pattern that started in 1998 at 147.68. While the current rebound from 95.77 might be strong, there is still no clear evidence to support changing the long term bearish outlook yet. Attention will be paid to the structure of the rise from 95.77 to determine whether it's just a correction to fall from 124.13 or a start of another medium term rally.

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