USD/JPY Weekly Outlook

USD/JPY failed to take out 105.70 resistance and reversed sharply last week. As discussed before, with bearish divergence condition in 4 hours MACD and RSI and break of the inner rising channel, rebound from 95.77 could have already completed after meeting upside target of 104.96/108.59 resistance zone. Initial bias will remain on the downside this week as long as 104.10 resistance holds. Further decline should be seen to 100.02 support. Break will confirm this case and bring retest of 95.77 low. However, above 104.10 will turn intraday outlook neutral first.

In the bigger picture, USD/JPY has made a medium term bottom after down trend from 124.13 has just met 76.4% retracement of 79.75 to 147.68 at 95.78. The rebound from there has met upside target of 104.96/108.59 resistance zone already. 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 that started at 124.13 intact and suggest that down trend from there is still in force. However, break of 108.59 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.

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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