USD/JPY dropped sharply to as low as 107.51 last week as decline from 112.22 accelerated. Current development suggests that whole rise form 104.45 has completed after rejection by 112.40 resistance. Initial bias stays on the downside this week for 107.65 support. Sustained break there will pave the way to retest 104.45 low. On the upside, above 108.86 minor resistance will turn intraday bias neutral first. But risk will now remain on the downside as long as 112.22 resistance holds.
In the bigger picture, current steep decline and rejection by 112.40 resistance mixes up the medium term outlook again. Sustained break of 108.30 support will argue that larger fall from 118.65 (Dec 2016) hasn’t completed. Further fall could be seen through 104.45 low. Nevertheless, break of 112.40 resistance will revive the case of bullish reversal and target 114.54 key resistance for confirmation.
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.