Source Action insight
USD/JPY
USD/JPY's sharp fall from 121.61 extended further to 115.13 last week initially but downside was contained there. Subsequent rebound has accelerated towards the end of the week and USD/JPY has risen to as high as 118.37 to close the week strongly. From a short term angle, break of 117.80 resistance confirm a short term low is already made at 115.13 and hence further rebound should be seen towards 61.8% retracement of 122.17 to 155.13 at 119.48 as long as USD/JPY stays above 117.18 support.
In the bigger picture, our view remains unchanged even though the current rebound is stronger than we expected. Previous break of medium term rising channel support (108.99, 114.41, 117.87) indicates the whole up trend from 108.99 has completed at 122.17. Weekly MACD's stay below signal line is still supporting this. The corrective nature of the rise from 108.99 swings favors back to the case that such medium term rally is merely part of a large scale consolidation that started at 121.38, with first leg completed at 108.99 and second leg completed at 122.17. The fall from 121.17 should then the third leg of such consolidation and deeper decline should at least be seen to below 114.02/41 support zone (61.8% retracement of 108.99 to 122.17 at 114.02) first with much possibility of further fall to retest 108.99 low.
Hence, we'll pay close attention to short term reversal signal as USD/JPY approaches 119.48 fibo resistance. But still, clear reversal pattern needs to be formed or a break below 116.88 resistance turned support is needed to indicate the completion of rebound from 115.13 first. Otherwise, further rise cannot be ruled out.
On the upside, decisive break of 119.48 fibo resistance will argue that the price actions from 122.17 is developing into large range consolidation instead. A retest of 122.17 high could be seen in such case. But still, firm break above this resistance is needed to confirm medium term rally from 108.99 has resumed. Otherwise, medium term outlook will be neutral at best.
