USDJPY could be in for a long-term selloff, as the pair has formed a complex head and shoulders pattern on its daily time frame. Price is still hovering around the neckline around 117.50-118.00, with a downside break likely to confirm that further losses are likely.

If that happens, USDJPY could fall by an additional 800 pips, which is the same height as the chart formation. This could take it down to the 110.00 levels or much lower, although near-term support areas could trigger profit-taking activity.

The 100 SMA just crossed below the longer-term 200 SMA, confirming that the path of least resistance is to the downside. However, stochastic is already in the oversold zone, which means that sellers are exhausted and might allow buyers to take over. If so, a bounce back to the nearby resistance at 120.00-121.00 is possible.

Earlier today, Japan printed a couple of weaker than expected economic reports. Core machinery orders fell by 14.4% while the Japanese PPI indicated a 3.4% decline in producer price levels, hinting that weaker price pressures are to be expected.

Coming up, Japan is set to print its preliminary machine tool orders report. Another downbeat result could still keep the yen supported, as risk sentiment appears to be driving its price action.

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As for the US initial jobless claims and a speech by FOMC member Bullard are lined up today. Tomorrow, retail sales, PPI, and consumer sentiment data are due.

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