This fundamental scenario is contrary to what the consensus believes, but it isn't at all absurd to think that market participants are still too agressive in their rate forecasts. With this scenario in mind, I'm interested in the current USDJPY technicals because there might be a negative divergence on the monthly . This divergence needs to be confirmed by a break below ¥122, which would likely lead to the dipping below its current support at 75. Once below ¥122, if the dollar continues to fall after the NFPs release on Thursday, 2 July, this theoretical correction could accelerate, leading to a sharp fall back to the ¥116 handle (with such divergences, a break in the support often leads to prices falling back to the support established before the second leg).
I'll be watching USD/JPY closely tomorrow (BoJ meeting) and next week for further indications of a reversal ahead of the NFPs release.
From an Elliott Wave perspective, we are near some wave relationships that would call for a significant drop.
A drop below wave (i) high of 120.35 really makes things look interesting as we would have plowed through the blue support line to get there.