USD/JPY Weekly Outlook

USD/JPY's rebound was short lived and was limited at 96.96 weakened again. The pair is still bounded in range above 94.87 and the development so far dampened the immediate bullish view that fall from 98.87 has completed at 94.87 already. We'll stay neutral for the moment. On the downside while another fall to below 94.87 cannot be ruled out, downside is expected to be continued by 93.84/94.44 support zone and finally bring stronger rally. On the upside, above 96.96 will revive the case that fall from 98.87, which is treated as the fifth leg in triangle consolidation has completed already and will target 98.87 resistance next.

In the bigger picture, price actions from 99.67 are treated as consolidation in the larger up trend from 87.12 only, in form of triangle pattern. Fall from 98.87 is viewed as the final leg of such consolidation and should be contained above 93.84 support to conclude the consolidation. Break of 98.87 will be an important signal that whole rally from 87.12 is resuming and break of 101.43 will pave the way to next key level at 110.65. However, note that a break below 93.58/84 support zone will invalidate the bullish case. Instead, it will revive the bearish case that USD/JPY has completed a head and shoulder top (ls: 99.67, h: 101.43, rs: 98.87) and will in turn indicate that whole down trend from 124.43 is still in progress.

In the long term picture, as rise from 87.12 is now expected to resume sooner or later, key cluster resistance level 61.8% retracement of 110.65 to 87.12 at 101.66 and 38.2% retracement of 124.13 to 87.12 at 101.25 will likely be taken out. More importantly, 55 weeks EMA (now at 99.21) and long term falling trend line resistance (now at 100.52) will likely be taken out too. In other words, whole long term down trend form 124.13 has likely completed at 87.12 already. So focus will now be on 101.43 resistance and sustained break will affirm the bullish case and extend the rally to 101.65 at least. Meanwhile a break of 93.53/84 support zone is now needed to revive the bearish case that fall from 124.13 is still in progress.

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