Despite edging higher to 95.87 last week, USD/JPY failed to sustain gain there and retreated sharply on Friday. Initial outlook is neutral this week with focus on 94.01 support. As long as this support holds, rise from 91.73 is still in favor to continue and above 95.87 will target falling channel resistance at 96.61. However, break of 94.01 support will suggest that choppy recovery from 91.73 has completed and will flip bias to the downside for retesting this low first.
In the bigger picture, the stronger then expected rebound from 91.73 suggests that a short term bottom is at least in place and mixed up the outlook of USD/JPY. The three wave structure of the fall from 101.43 to 91.73 and the channeling property do argue that it's corrective in nature. But there won't be any confirmation of completion of such fall until a break of 98.87 resistance. On the other hand, it's still possible that decline from 101.43 is resuming whole down trend from 124.13. Hence while we'll favor upside as long as 93.01 support holds, we'll stay neutral until at least a break of the upper channel resistance at 96.96. Meanwhile, completion of rebound from 91.73 on failure to break through the channel resistance will in turn argue that whole fall from 101.43 is still in progress for at least another low below 91.73.
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