USD/JPY increased a little and erased the morning losses, but this could be only temporary because it could drop sharply in the upcoming days if the USDX will slide further. Price has shown some exhaustion signs in the previous days, I’ve said that we may see another drop on the short term before will recapture more directional energy to be able to increase further.

As you already know, the pair moves in range on the short term, so we have to wait for a clear direction. The pair decreased in the morning as the Nikkei stock index has decreased a little as well, but the Yen has lost ground as the index has jumped higher and is approaching the 20756 Friday’s high. Remains to see what will happen on the Nikkei because is trading near an important resistance area.

The Japanese banks were closed today in observance of Health-Sport day, but most likely we’ll have a significant move in the morning after the release of the Current Account and the Economy Watchers Sentiment.

I’ve added the Nikkei’s daily chart to show you better what’s happening with the Yen and what are the perspectives. JP225 increased and is retesting the upside line of a potential Rising Wedge pattern, we have a major target also at the first warning line (WL1) of the descending pitchfork. A rejection from here or a false breakout will send the rate tumbling on the short term and will force the Yen to appreciate versus its rivals. Only a valid breakout will confirm a Yen’s drop versus all its rivals.

Price failed to retest the warning line (wl1) signaling and exhaustion and a potential drop. It also failed to approach and reach the 23.6% retracement level. We’ll see what will happen in the upcoming days, but a drop towards the 250% Fibonacci line (ascending dotted line) is favored. USD/JPY will ignore the 250% line if will reach it, a larger drop will be confirmed if this scenario will take shape.