USD/JPY edged lower to 109.02 last week but formed a temporary low there and recovered. Initial bias is neutral this week first. Current development argues that rebound from 104.69 has completed at 112.40 already. Thus, upside of current recovery should be limited by 55 day EMA (now at 110.88) to bring another fall. On the downside, break of 109.02 will extend the decline from 112.40 to retest 104.69 low.
In the bigger picture, USD/JPY is staying inside falling channel from 118.65. Currently development suggests that rebound from 104.69 is only a corrective move. And fall from 118.65 is not completed yet. Decisive break of 104.69 will extend the down trend towards 98.97 support (2016 low). For now, we’d expect strong support above there to bring rebound.
In the long term picture, the rise from 75.56 (2011 low) long term bottom to 125.85 (2015 high) is viewed as an impulsive move, no change in this view. Price actions from 125.85 are seen as a corrective move which could still extend. In case of deeper fall, downside should be contained by 61.8% retracement of 75.56 to 125.85 at 94.77. Up trend from 75.56 is expected to resume at a later stage for above 135.20/147.68 resistance zone.
