USD/JPY Weekly Outlook

Despite edging higher to 91.08 last week, USD/JPY lose momentum with bearish divergence conditions in 4 hours MACD and RSI and made a short term top there. Initial bias is neutral this week and some consolidations should be seen below 91.08 first. Nevertheless, downside should be contained by 89.62 cluster support (50% retracement of 88.13 to 91.08 at 89.60) and bring rally resumption. Above 91.08 will target near term trend line resistance (now at 91.37) and then 92.14 resistance.

In the bigger picture, outlook is rather mixed and we'll stay neutral for the moment. On the upside, break of 92.14 resistance will confirm that whole decline from 93.74 has completed with three waves down to 88.13 already. The corrective structure will in turn indicate that rise from 84.81 is still in progress for another high above 93.74. On the downside, break of 88.13 will reaffirm the bearish case that rise from 84.81 is completed at 93.74 already and will turn focus to 87.36 support for confirmation.

In the long term picture, downside momentum is clearly diminishing with monthly MACD back above signal line. However, there is no confirmation of long term reversal yet. Down trend from 124.13 might still continue as long as 101.43 resistance holds and might extend further towards 79.75. Nevertheless, break of 101.43 resistance will break the lower high lower low pattern and will suggest that a long term bottom is in place. The trend should then reversed to continue the sideway pattern that started at 79.75 in 1995.

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