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USD/JPY could rebound in the short term if the USDX and the Nikkei stock index will climb higher. The pair is trading at 106.92 level, it is moving sideways on the lower timeframes, that's why we need confirmation before we consider going long again on this pair.
The pair is still under massive selling pressure, it is located below major resistance levels, only a valid breakout above the near-term obstacles could suggest buying again. The price action has signaled that the decline could end and that USD/JPY could develop a bullish momentum in the short term.
USD/JPY has decreased sharply after the rejection from the first warning line (WL1) of the orange descending pitchfork, but it has failed to reach at least the 150% Fibonacci line (descending dotted line) or the 50% level, near the S1 (106.47).
The pressure is still high as long as USD/JPY is trading below the Pivot Point (107.28) level and below the warning line (WL1). Technically, only a valid breakout above the warning line (WL1) and above the 38.2% level will really confirm a reversal and a potential larger upwards movement.
USD/JPY could resume its sideways move, you should be careful because another lower low, a valid breakdown below the 50% level and below the S1 (106.47) will signal a further drop. Personally, I would have liked to see a false breakdown with great separation below the S1 (106.47) because this action would have signaled a reversal and it would have given us a chance to buy it from the lows.
A valid breakdown below the S1 (106.47) will invalidate a potential reversal and will confirm a further drop towards the 150% Fibonacci line and towards the S2 (105.18) static support. We may have a long opportunity if USD/JPY will make another higher high, it if jumps and closes above the 107.63 level, and above the 38.2% level.
As I've said earlier, a reversal and a major upside movement will be confirmed only if USD/JPY registers a valid breakout above the first warning line (WL1). The R1 (108.57) could be used as a potential upside target.
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