USD/JPY dropped sharply to 116.13 last week. The pair then drew support from 115.55/116.38 (38.2% retracement of 101.08 to 125.85 at 116.38) and rebounded. Price actions from 125.85 should develop into a corrective pattern that would extend in short to medium term. Thus we'd expect strong resistance above 61.8% retracement of 125.27 to 116.13 at 119.62 and bring another fall. Below 119.78 minor support will turn bias to the downside for 115.55/116.38 support again.
In the bigger picture, a medium term top should be in place at 125.85 on bearish divergence condition in daily MACD. Initial support was seen at 38.2% retracement of 101.08 to 125.85 at 116.38. But the correction shouldn't be completed yet. Another fall is expected and sustained break of 115.55 will suggest that it's corrective whole up trend from 75.56 (2011 low). In such case, the decline would extend to 38.2% retracement of 75.56 to 125.85 at 106.63. We'll keep monitoring the development to assess the chance of this bearish case.
In the long term picture, the strong impulsive look of the rally from 75.56 suggests that USD/JPY is now in a long term up trend. While momentum is still strong, the overbought condition as seen in monthly chart might start to limit upside momentum above 124.13 resistance. Hence, even though the trend is far from ending, we'll start to be cautious on sign of medium term topping.
In the bigger picture, a medium term top should be in place at 125.85 on bearish divergence condition in daily MACD. Initial support was seen at 38.2% retracement of 101.08 to 125.85 at 116.38. But the correction shouldn't be completed yet. Another fall is expected and sustained break of 115.55 will suggest that it's corrective whole up trend from 75.56 (2011 low). In such case, the decline would extend to 38.2% retracement of 75.56 to 125.85 at 106.63. We'll keep monitoring the development to assess the chance of this bearish case.
In the long term picture, the strong impulsive look of the rally from 75.56 suggests that USD/JPY is now in a long term up trend. While momentum is still strong, the overbought condition as seen in monthly chart might start to limit upside momentum above 124.13 resistance. Hence, even though the trend is far from ending, we'll start to be cautious on sign of medium term topping.
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