The USD/JPY has finally reached the 103.60 price zone, strong long term resistance: if you watch your monthly chart, you will find several lows around the level, between 2004 and 2008. More important, after reaching the level the pair shed near 300 pips in less than 24 hours: is that the first sign of a top in USD/JPY? Probably not, as the pair has steadily advanced around 670 pips just this May, and price bounced strongly up on an attempt to break below the 38.2% retracement, around 101.20 area.  As long as dips towards that level, or even below it attract buyers, the downside seems limited in the midterm. 

A weekly close below that mark will be however a different story, with further downward correction expected towards 99.50/70 price zone, 61.8% retracement of the same rally and past April highs. Daily chart shows indicators heading lower, finally correcting the overbought readings seen for the past two weeks, which supports some probable correction ahead. However, even if the 99.50/70 area is reached, the long term perspective won’t change as a quick recovery should follow on approaches to the 100.00 level.

But the upside seems now not that easy after 8 months of straight rises and 103.60 has proved strong. Investors will need a high dose of convincement to continue buying at current levels, either further BOJ easing or signs of dollar strength, neither quite clear at the time being. Steady gains above 103.60 however, should lead to an extension towards 105.00, this upcoming week, as there’s not much in the middle.

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