USD/JPY dropped to as low as 85.98 last week and the break of 86.26 confirms that whole decline from 94.97 has resumed. Short term outlook will remain bearish as long as 88.11 resistance holds and current fall should target 84.81 key support level next. Nevertheless, break of 88.11 will indicate that a short term bottom is formed and bring strong rebound.
In the bigger picture, the corrective three wave structure of the rise from 84.81 to 94.97 suggests that whole down trend from 2007 high of 124.13 is still in progress. Fall from 94.97 is tentatively treated as resumption of such down trend and should extend beyond 84.81 low. Break of 84.81 will target next key level of 79.75 (1995 low). On the upside, break of 88.11 resistance will indicate that fall from 94.97 is possibly completed and bring stronger rebound. However, note that break of 94.97 resistance is still needed to be the first sign of medium term reversal. Otherwise, we'll stay bearish.
In the long term picture, current development suggests that USD/JPY has not bottomed out yet and the down trend will extend beyond 84.81 to 79.75. However, we'd be cautious on any sign of loss of momentum and reversal on next fall.