USDJPY had dropped through 104.80 levels yesterday post FOMC, before pulling back. The currency trades above 105.00 handle for now and probabilities remain high for a bullish reversal from here. Bulls are poised to remain in control until prices stay above 104.20 levels.
USDJPY larger degree wave structure still suggests an A-B-C rally to terminate above 111.75 levels. The rally between 101.18 and 111.75 could be Wave (1) or A as labelled on the chart here. The subsequent drop towards 104.20 could be marked as Wave (2) or B.
Please also note that the above drop has been corrective and had found support just below fibonacci 0.618 retracement of the previous rally between 101.18 and 111.75 levels respectively. If the above structure holds well, USDJPY should remain above 104.20 lows and resume higher.
Immediate resistance is seen through 107.50, followed by 108.20, while support is seen through 101.18 levels respectively. Bulls might be poised to push through resistance at 107.50 and 108.15/20 in the near term. Eventually, the structure should complete above 110.00 and 111.75 levels.
Alternately, if prices drop below 104.20, USDJPY might find support around 103.50 levels before reversing higher again. Only a consistent drop below 103.00 would threaten the above bullish structure and attempt a break below 101.18 levels.
USDJPY outlook remains constructive for bulls over the near term until 104.20 support holds good. Further, a push through 107.00/107.50 would further confirm that bulls are back in control.
Long against 104.00, targeting 110.00 and above.