USDJPY has been bearish since October 16 and has now reversed around half of the rally that took place from 107.31 to 114.73. The market is testing two-month lows at the 50% Fibonacci (111.04) of the September 8 to November 6 upleg.
A move above 112.00 would help ease downside pressure but a rise above 113.00 (23.6% Fibonacci) would invalidate the current bearish bias.
The market is expected to be supported at current levels as it trades in a critical zone between the key 111.0 level and the 50% Fibonacci. But a deeper decline cannot be ruled out since RSI has dropped below 50. An extension lower would target the 61.8% Fibonacci at 110.14. From this point, the market would head towards the lower end of the longer-term range (108.00) that has been forming since January.
The break below the 50 and 200-day moving averages adds to the bearish view in the short-term. In the bigger picture, the market remains neutral.
