The recovery in USD/JPY last week suggests that rebound from 116.13 is still in progress. Initial focus will be on 121.62 resistance this week. Break will target 100% projection of 116.13 to 121.62 from 118.58 at 124.01. We'll be cautious on strong resistance from there to bring reversal. On the downside, break of 118.58 will turn focus back to 116.13 support instead.
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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