Technical outlook:

USDJPY slipped through the 126.36 lows on Tuesday before finding interim support. The currency pair is back to 127.00 at this point in writing and looking to rally further through 129.40 in the next few trading sessions. Immediate downside risk from here is low as bulls remain inclined to hold prices above 126.00 and produce a counter-trend rally.

USDJPY has now carved a meaningful lower degree downswing between 131.34 and 126.36. Ideally, the above drop should be retraced through the 129.40-50 levels, which is the Fibonacci 0.618 retracement of the entire drop. The high probability remains for the downtrend to resume thereafter and drag towards 124.50 at least.

USDJPY is facing immediate resistance through 128.00, followed by 129.50 and higher while interim support is seen around 126.00 respectively. A break above 128.00 will confirm that bulls are back in control and that the counter-trend rally is on its way. Traders might prepare to sell higher again from around 129.40-50.

Trading plan:

Initially up towards 129.50 then lower again towards 124.50 against 131.34

Good luck!