USD/JPY dropped sharply to as low as 109.52 last week but recovered since then. Initial bias is neutral this week first. On the downside, sustained trading below 55 day EMA (now at 109.78) will suggests that it’s at least correcting the rise from 102..58. Deeper fall would be seen to 38.2% retracement of 102.58 to 111.65 at 108.18. For now, risk will stay on the downside as long as 111.65 resistance holds, in case of recovery.
In the bigger picture, medium term outlook is staying neutral with 111.71 resistance intact. Though, as notable support was seen from 55 day EMA, rise from 102.58 is mildly in favor to extend higher. Decisive break of 111.71/112.22 resistance will suggest long term bullish reversal. Rise from 101.18 could then target 118.65 resistance (Dec 2016) and above. However, sustained break of 55 day EMA would revive some medium term bearishness, and open up deep fall back towards 102.58 support.
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 pattern 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.