USD/JPY: Sellers build 2nd cycle down

Last Friday’s confirmation of a bearish outside day has set up in motion what should be the continuation of an offered market. The daily cycle remains up but the last leg failed to neither reach the 100% proj target nor retest the previous high. That has set out a counter-cyclical move with potential credence to compromise the constructive outlook.

As consolation for Yen bears, the latest CoT report indicates a market still overly committed to USD/JPY longs, but with risk-off conditions firmly in place and what might be a transition into a structurally bullish EUR/USD, it certainly represents a tough backdrop to expect topside overextensions.

The dubious upside potential in USD/JPY is somewhat re-asserted by the large magnitude and impulsiveness of the 2nd cycle down on the hourly. It sets up the stage for a 3rd pushdown, although not before a potential correction from 112.50’s 100% proj target.