Daily Pivots: (S1) 108.85; (P) 109.10; (R1) 109.38; More…
USD/JPY drops sharply after failing to break through 110.02 short term top. Consolidation from there is extending with another falling leg. Break of 108.64 will bring deeper decline. Still, we’d expect strong support from 38.2% retracement of 104.62 to 110.02 at 107.95 to contain downside and bring rebound. Meanwhile, on the upside, break of 110.02 will resume the rise from 104.62 to 61.8% retracement of 114.73 to 104.62 at 110.86 next.
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 as 55 day EMA (now at 107.95) holds. Decisive break of 114.73 resistance will confirm our view and target 118.65 and above. However, sustained break of 55 day EMA will dampen this bullish view and turn focus back to 104.62 low instead.
