Technical outlook:

USDJPY dropped through 127.00 during the New York session on Thursday, taking out initial support as marked on the 4H chart here. We have revised the wave structure and potential downside targets as bears asserted themselves and triggered a much deeper correction. The currency pair is expected to pullback through 129.60-70 in the near term.

USDJPY has carved a meaningful downswing between 131.34 and 127.00 in the past few trading sessions. Ideally, the above drop should be retraced towards the 129.60-70 zone, which is also the Fibonacci 0.618 level as projected here. Bears will be poised to be back in control thereafter and drag through 125.00 mark.

USDJPY is now facing strong resistance around 131.34 while the next-in-line support is seen at 125.10. Once the counter-trend rally is complete at 129.60, the currency pair is expected to turn lower through 125.00 and 124.00. Traders might book profits on short positions initiated earlier around 131.00 and look to sell higher again.

Trading plan:

Potential rally to 129.60 against 126.00, then lower again.

Good luck!