USD/JPY Weekly Outlook

The strong rebound from 95.61 last week indicates that fall from 101.43 has completed and dampened the immediate bearish view. Initial bias remains on the upside this week as long as 97.96 minor support holds and further rally could be seen. At this moment, a break above 101.43 high cannot be ruled out. But upside potential should be limited as strong resistance should be seen as USD/JPY approaches medium term trend line resistance at 102.45. Below 97.96 minor support will turn intraday outlook neutral first. Break of 95.61 support will now be the important signal that whole rally from 87.12 has completed and will turn short term outlook bearish in such case.

In the bigger picture, last week's development dampened the view that rise from 87.12 has completed at 101.43 already. Nevertheless, from a medium term point of view, the down trend from 124.13 (07 high) is still intact. This is supported by the fact that USD/JPY is still struggling to take out 55 weeks EMA (now at 99.93 decisively). Bearish divergence condition in daily MACD and RSI are also indicating loss of upside momentum and suggest possibility of reversal. Hence, while further rise to above 101.43 cannot be ruled out, we'd expect strong resistance as USD/JPY approaches medium term trend line resistance at 102.45 and bring reversal. Break of 95.61 support will be an important indication that whole rebound from 87.12 has completed and should bring resumption of the down trend from 124.13 eventually. However, note that sustained trading above the trend line resistance will argue that whole down trend from 124.13 has indeed completed already and should then put focus back 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.