USD/JPY’s sharp decline last week confirmed short term topping at 111.39. Price action from there is seen as a corrective move. We’d expect support from 108.82 cluster support (38.2% retracement of 104.62 to 111.39 at 108.80) to bring rebound. On the upside, above 110.32 minor resistance will argue that the pull back is completed. And, in that case, retest of 111.39 high should be seen. However, firm break of 108.82 will dampen our view and bring deeper decline to 61.8% retracement at 107.20 and possibly below.
In the bigger picture, corrective decline from 118.65 (2016 high) has completed with three waves down to 104.62. Rise from 104.62 is possibly resuming the up trend from 98.97 (2016 low). This will be the preferred case as long as108.82 support holds. Decisive break of 114.73 resistance will confirm our view and target 118.65 and above. However, sustained break of 108.82 will dampen the bullish outlook and revive the case of a break of 104.62 low before bottoming.
In the long term picture, the rise from 75.56 (2011 low) long term bottom to 125.85 top 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.