Review and evolution
After the yen’s sharp consolidation in April against a backdrop of Bank of Japan's decision to keep its monetary policy unchanged, Japanese Finance Minister Taro Aso expressed readiness to intervene in forex markets.
The USD/JPY pair has grown a bit above a level of 110.80 (23.6% Fibonacci retracement) in an ascending correction since the beginning of May.
However, USD/JPY continues to trade downwards on the US weak NFPR in May. The pair has dropped by almost 430 points since the beginning of the month. May's growth therefore is almost fully cancelled out because of the USD’s worldwide consolidation.
USD/JPYcame close to May's and annual lows at about 105.50. In case 106.20 and 105.50 levels are broken, the pair may continue falling to a support level of 104.50 (ЕМА200 on the monthly chart). OsMa and Stochastic indicators suggest short positions on H4, daily, weekly, and monthly charts. Nevertheless, short positions should be approached with caution at the current levels as a sharp rebound may take place.
However, without Bank of Japan's intervention, the pair will apparently continue to fall despite short-term ascending corrections.
An alternative scenario indicates that a breakout of a level of 109.00 (ЕМА200 and the upper border of a descending channel on the H4 chart) will make the pair fall to levels of 109.50 (ЕМА50 on the daily chart), 110.80 (23.6% Fibonacci retracement to the decline that started from a level of 125.65 in June 2015).
Active sales will be possible at 110.80.
Consolidation above the level of 110.80 suggests a further growth to 112.00, 113.65 (38.2% Fibonacci retracement), and 114.20 (ЕМА200 on the daily chart).
Support levels: 106.20, 105.65, 105.00, 104.50
Resistance levels: 108.00, 109.50, 110.00, 110.20, 110.80, 112.00, 113.00, 113.65, 114.20
Buy Stop 107.10. Stop Loss 106.80. Take-Profit 108.00, 109.00, 109.50, 110.00, 110.20, 110.80
Sell by Market Stop Loss 106.90. Take-Profit 106.20, 105.65, 105.00, 104.50
Trading in downward channel
Support level at 106.20