USD/JPY Weekly Outlook

USD/JPY finally broke out of range last week and the fall from 110.66 accelerated to as low as 97.91. From a short term angle, further decline is still in favor as long as 101.48 resistance holds. As discussed before, the fall from 110.66 is expected to retest 95.77 medium term low first. However, note that intraday down side momentum is diminishing with mild bullish convergence condition in 4 hours MACD and RSI. Above 101.48 will indicate that a short term bottom is formed and bring stronger rebound to retest 103.49 level, prior support now resistance.

In the bigger picture, medium term rise from 95.77 has completed at 110.66 with bearish divergence condition in daily MACD. Also, the three wave structure of such rise argues that it's just correction, or part of the consolidation to the down trend from 124.13. Hence, deeper fall is now expected to retest 95.77 low. Break will confirm that whole down trend from 124.13 has resumed and should target 61.8% projection of 124.13 to 95.77 from 110.66 at 93.13 first. On the upside, above 106.14 resistance will indicate that fall from 110.66 has completed. This will suggest that medium term consolidation from 95.77 is probably still in progress. In such case, another test of 110.66 could be seen before resuming the down trend from 124.13.

In the longer term picture, there are two very different interpretation for the price actions that started from 79.75 (95 low). Firstly, it could be in form of a triangle that started at 79.75 and ended with five waves to 124.13. In other words fall from 124.13 is just part of an even larger scale down trend which should push USD/JPY below 95.77. Secondly, the triangle could indeed start at 147.68 and needed at 95.77. In other words, the current rise from 79.57 represents resumption of the rise from 79.75 which should send USD/JPY above 147.68 (94 high). The corrective structure of the rise from 95.77 is favoring the former case for the moment.

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