USD/JPY Weekly Outlook

USD/JPY dropped sharply after being rejected below 107.09 resistance last week. But it’s staying above 105.04 support, initial bias stays neutral this week first. With 107.09 minor resistance intact, further decline is in favor. On the downside, break of 105.04 will resume larger decline from 112.40 to 104.69 low. Break will target 100% projection of 112.40 to 106.78 from 109.31 at 103.69. On the upside, though, break of 107.09 resistance will indicate short term bottoming and bring stronger rebound.

In the bigger picture, decline from 118.65 (Dec 2016) is still in progress and the pair is staying well inside long term falling channel. Break of 104.62 will target 100% projection of 118.65 to 104.62 from 114.54 at 100.51. For now, we’d expect strong support above 98.97 (2016 low) to contain downside to bring rebound. In any case, break of 112.40 is needed to the first serious sign of medium term bullishness. Otherwise, further decline will remain in favor in case of 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.

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