Technical outlook:
USD/JPY might be preparing to resume its next leg lower towards 112.00 and 109.00 soon. The pair earlier rallied through the 116.30-40 zone before finding resistance in January. Since then, bears have been successful to drag prices lower towards the 113.50 mark, carving a meaningful downswing. Note that the price broke below the ascending trend line as well.
The subsequent rally through 115.60 has unfolded in three waves, hence corrective. Furthermore, the corrective wave has tested the backside of the support turned resistance trend line and also the Fibonacci 0.618 retracement of the earlier downswing. The above convergence is strong enough to turn prices lower again.
Along with the wave structure, USD/JPY price action is suggesting a potential Head and Shoulder being carved, as indicated on the daily chart here. The Head is around the 116.30-40 mark, Left Shoulder around 115.60, and potential Righ Shoulder in place at 115.60 as well. If the above structure holds well, bears should be back in control and turn prices sharply lower through 109.00 levels going forward.
Trading plan:
Potential drop through 112.00 and 109.00 against 117.00
Good luck!
