USD/JPY Weekly Outlook

USD/JPY edged higher to 99.67 initially last week but subsequent sharp fall indicates that a short term top is formed with bearish divergence condition in 4 hours MACD and RSI. Initial bias is mildly on the downside this week for deeper decline to 38.2% retracement of 87.12 to 99.67 at 94.87. On the upside, Above 98.51 will flip intraday bias back to the upside for retest of 99.67 high.

In the bigger picture, with USD/JPY still trading below 55 weeks EMA (now at 100.49) as well as medium term falling trend line resistance at 103.15, there is no indication of completion of down trend from 124.13. Having said that, we'd treat the rise from 87.12 as correction in the larger down trend only and expect strong resistance between 100 and 104 resistance zone. Below 92.50 support will suggest that such rebound has completed and will turn outlook bearish for a retest of 87.12/13 support again. However, note that decisive break of mentioned 100/104 resistance will be taken as an early alert that whole down trend from 124.13 has completed and will turn focus to 110.65 resistance for confirmation.

In the long term picture, price actions that started from 79.75 (95 low) has completed in form of a triangle that ended with five waves to 124.13. In other words fall from 124.13 is just part of an even larger scale down trend. Such fall from 124.13 is expected to develop into a five wave sequence (95.77, 100.66,.....) and could extend further to retest 79.75 low. Break of 110.66 is needed to invalidate the long term bearish view.

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