Technical outlook:
USDJPY continues to flirt around 135.10 at this point in writing, after sliding through 134.50 on Monday. The currency pair might have carved a meaningful top around 135.60 last week and is preparing to resume lower from here. Bears will be inclined to hold prices below 135.60 to keep the structure intact.
USDJPY seems to have carved a lower degree downswing between 135.60 and 131.50 in the previous week. The subsequent rally has been sharp but is holding below its previous swing highs around 135.60. If the above structure holds, bears will be inclined to push prices lower from here and drag the pair through the 124.90-125.00 zone.
USDJPY bears are now potentially targeting below the 126.36 initial support. A break there will confirm that bears are back in control and that a trend has reversed. It would be a good idea to sell the currency pair on rallies thereafter. Traders might be preparing to initiate fresh short positions around the current levels with risk above 135.50.
Trading plan:
Potential drop to 125.00 against 136.00
Good luck!
