FXStreet (Delhi) – Research Team at TDS, notes that the USDJPY has turned lower in recent days after several failed attempts at the end of last year to climb above 124. Key Quotes “This validates our view that the 5 June high of 125.86 may represent the top of the powerful 67% rally that started in late 2012. While the long-term prospects for this pair remain uncertain, we think we are due for a further correction in the weeks ahead. Since the start of the rally, the deepest pullback seen has been less than 10% (May-June 2013). Considering the scale of the advance, corrections have been very shallow in recent years. We think USDJPY’s luck is running out. With the sustained break below 120 this week, we think the next sustained move to the downside may already be underway. We think investors should use any near-term bounce as an entry point to build strategic short positions. An initial target of the 24 August panic low of 116.18 seems achievable, but we think declines can extend further. Beyond that mark, our next target comes in at 113.34, which represents the 50% retracement level of the final phase of the USDJPY rally (May 2014-June 2015), but we think the 110 area, a local peak from October 2013, could represent a much stronger attractor should a correction gather steam. From there, our stretch target comes in around the 105 region. Not only has this zone provided both support (Oct 14) and resistance (Jan 14) during the ascent, but it also comes in just below the 38.2% retracement level (106.57) since the start of Abenomics. The primary risks to our view arise from policy. An unexpected acceleration in US growth that has the Fed move to a more hawkish stance could see the USD rally broadly. All else equal, we would have to expect the JPY to participate accordingly. Similarly, while we think it is unlikely, a rapid deterioration in Japanese or regional growth prospects might put the BoJ back into an aggressive easing mode. While we think the market might begin to doubt the BoJ’s ability and willingness to ease further, spot could trade to new highs, at least temporarily. At this stage, we would be concerned by a recovery above 120.66 while a sustained rally above 123.76 would conceivably have us revise our outlook entirely and return to a bullish stance. Indeed, a break above 125.86 could herald a break higher into a new 127-135 range.” For more information, read our latest forex news.