USDJPY slipped through the 135.12 lows in the early hours of the Asian session on Thursday, before finding some bids. The currency pair is seen to be trading close to the 135.70 mark at this point in writing. It is expected to sink lower towards the 131.50 initial support in the next few trading sessions. Bears will be poised to hold below the 136.70 mark to keep the structure intact.
USDJPY has produced a religious rally between 102.50 and 136.70, which looks complete. A break below 131.50 will confirm that bears are back in control and that a major top is in place at the 136.70 mark. Bears will be inclined to unfold a much deeper correction towards 126.00 and lower levels thereafter.
USDJPY might have carved a lower-degree downswing between 136.70 and 135.12 in the past two trading sessions. Ideally, prices might produce intraday pullback rallies but should remain well capped below the 136.70 mark. Traders might be preparing to hold existing shorts and add further on pullbacks towards the 136.00 mark, against 136.70 from here on.
Potential drop towards 131.50 and 126.00 against 137.00