The USD/JPY drops and tries to approach the 111.98 yesterday’s low. Is trading in the red even if the Nikkei stock index extended, the latest gains and reached fresh new highs. Price dropped only because the USDX has dropped further and has resumed the last three day’s losses.

The USDX is located right above a crucial dynamic support, a breakdown will signal a further drop at least till will reach the 92.49 static support, where he may find demand again. Technically, the USD/JPY should drop further on the short term after several false breakouts, but remains to see what will happen because the Yen received support from the Japanese Core Machinery Orders, which increased by 3.4% in August, beating the 0.9% estimate, while the Prelim Machine Tool Orders were reported at 45.3%, higher versus the 36.2% in the former reading period.

The USDX dropped further and reached the outside sliding line (sl) of the minor ascending pitchfork, a drop below this line will confirm a drop towards the 92.49 horizontal support, a rejection from this level will announce a potential Inverse Head and Shoulders on the Daily chart. We’ll see what will happen tonight after the FOMC Minutes will be sent to the public, you should be careful because the event could shake the markets.

The price decreased a little and stay above the 111.98 previous low, we’ll see if the bears will have enough directional energy to push it towards the 38.2% retracement level. USD/JPY moves sideways on the Daily chart, so we’ll have a clear direction only after a valid breakout from it. Price could consolidate above the 38.2% retracement level in the upcoming days trying to recapture more directional energy.

I’ve said in the previous articles that the rate could take out the support from the 260% Fibonacci line (ascending dotted line) if will reach it. Technically, it is expected to drop towards the lower median line (lml) of the minor ascending pitchfork, will approach it if the FOMC Minutes will disappoint and if the Nikkei will drop fast.