USD/JPY edged lower to 109.71 last week but recovered. But upside was limited below 110.95 minor resistance so far. Initial bias stays neutral this week first. On the upside, break of 110.95 will argue that the pull back from 112.13 has completed at 109.17. In this case, intraday bias will be turned back to the upside for retesting 112.13. On the downside, break of 109.71 will resume the decline from 112.13 to 38.2% retracement of 104.69 to 112.13 at 109.28. Break of 109.28 will target 61.8% retracement at 107.53 next.
In the bigger picture, while the rebound from 104.69 was strong, USD/JPY failed to sustain above 55 week EMA (now at 110.80), and was kept well below 114.54 resistance. Medium term outlook is turned mixed and we’ll wait for the structure of the fall from 112.13 to unveil to make an assessment later. For now, more range trading is expected between 104.69 and 112.13 first.
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.
