Bottom line:  USDJPY bearish structure remain intact until prices hold below the 112.22 mark. A sharp decline could be seen if bears are able to hold the above resistance.

Technical Analysis:

USDJPY might be sending out mixed signals after having dropped from 112.22 through 101.18 levels initially and then producing a sharp rally. Please note that the recent rally from 101.18 has stalled at 111.71, just below the marked resistance. Structurally, this keeps USDJPY bearish against 112.22 view intact for now. If the above holds, a sharp decline could be seen pushing prices below the 101.18 mark. Today, we have presented a weekly chart view since October 2011 to have a bird eye’s view. Please note that the rally between 75.57 and 125.85 has been an impulse as labelled here. The 3^rd wave was extended, which is quite normal in an impulse. Since the 125.85 levels, USDJPY has been unfolding a corrective wave pattern, which could be complete at 99.00. Alternately, the correction might be much deeper and prices may drop until 94.60 levels as shown here. The fibonacci 0.618 retracement of the previous rally is also seen around 94.50/60 levels. A bullish bounce could be expected if prices manage to reach 94.00/95.00 levels going forward. The above proposed structure remains valid only if prices stay below 112.22/112.40 resistance. A break higher would imply that USDJPY triangle consolidation has broken on the higher side and bulls will be back in control. At this point in writing the USDJPY pair is seen to be trading around 110.50 levels. Most traders might be preparing to initiate fresh short positions with protective stops above 112.22 and projected targets below 99.00 respectively. If the above resistance holds, potential Wave 3 could unfold from here as USDJPY produces a sharp reversal lower.

Prepared by

Harsh Japee, Technical Analyst.

USDJPY Chart

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