USD/JPY is testing the 200-day average for the first time in several months. The move follows last week’s sharp rebound which was triggered by a bullish DeMark™ signal from oversold conditions (see bottom intraday chart).

Our view remains bullish, as USD/JPY verges toward a major long-term 40-year cycle upside reversal. Expect key cycle inflection points to resume sharply over the multi-week/month horizon, into our upside trigger levels at 78.30, then 80.00/60 and 82.00, ahead of 83.30.

Meanwhile, confirmation below 75.60 helps resume the third price retracement (PIR III), we had been expecting, back to pre-intervention levels and potentially even a new post World War II record low (75.35).

Sentiment in the option markets continues to suggest that USD/JPY buying pressure remains overcrowded as everyone continues to try and be the first to call the market bottom, within the end of this multi-year contracting pattern (see top-right chart insert).

This may first inspire a temporary, but dramatic, price spike through psychological levels at 75.00 and perhaps even sub-74.00. Such a move would help flush out a number of downside barriers and stop-loss orders, which would create a healthy price vacuum for a major reversal.

Daily Technical Report