The yen products were heavily offered in overnight trading to begin the first month coming out of the slow summer season. USD/JPY and EUR/JPY are over a big figure lower, but USD/JPY is the biggest loser in terms of percentage loss.

USD/JPY failed at the major 2006 downtrend resistance of 117.50 area last week and has since moved 150 points lower to test the 5-month uptrend channel support at 116.00 zone. Should this level give way, the implications are for much deeper corrections in the 110.00 zone.

RSI often respects trendline support and resistance much in the same way price does. My regular readers know that I seldom use indicators, but when RSI breaks a trendline as price is testing a similarly positioned trendline, it's usually costly to not pay attention. So RSI is below the May, Aug, and September uptrend support signaling to us that the USD/JPY 116.00 trend support is skating on thin ice.

At first glance, this should look familiar to last week's EUR/JPY symmetrical pullback. USD/JPY put in a 161 point pullback at the end of August before continuing higher to the eventual failure point at trendline resistance in the 117.50 zone setting up the next pullback. So far, the pullback has traveled 165 points to the projected support level of 115.88 and rallied back above the .618 retracement at 116.05.

The symmetrical support zone will probably be strong enough to force price back up into the 116.75 zone, but not strong enough to see a break to new highs. The .618 retracement shown in green at 116.85 should cap price so shorts can be initiated on an approach of this level with stops just over 117.00.

EUR/JPY has a very similar setup in the works so watch for an approach of 149.70 to fail continuing what Asian and European traders started last night.

Todd Gordon is a Technical Currency Strategist and Fund Trader with GAIN Capital Group.

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The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.