The USD/JPY dropped today and tries to retreat after the last three day’s impressive rally. The dollar has lost ground versus all its rivals as the dollar index has plunged even if the United States data have come in better in the yesterday’s trading session. The Yen increased as the Nikkei stock index dropped significantly today and erased the morning gains and invalidated the breakout above a dynamic resistance.

Is very important what will happen on the USDX and on the Nikkei in the upcoming 2, 3 days because a further drop will force the USD/JPY to reach fresh new lows again.

The Yen increased on the mixed Japanese data, the Final Manufacturing PMI dropped from 53.8 to 53.6 points, even if the traders have expected to see the indicator steady at 53.8 points, while the Capital Spending rose by  4.2%, more versus the 3.3% estimate and versus the 1.5% growth in the former reading period. The Unemployment Rate remains steady at 2.8% for the fifth month in October, matching expectations.

The Tokyo Core CPI increased by 0.6%, matching expectations and the 0.6% growth in the former reading period, while the National Core CPI surged by 0.8%, has come in line with expectations. Moreover the Household Spending increased by 0.0%, beating the -0.2% estimate.

Price dropped a little today and failed to reach and retest the fourth warning line (WL4) of the descending pitchfork. However, is premature to say that the upside momentum is completed because it could jump higher anytime as long as is trading above the 38.2% retracement level. The failure to reach the lower median line (lml) of the minor ascending pitchfork signaled an oversold and a potential upside movement.

I’ll repeat myself by I want to remind you only a valid breakout above the WL4 will confirm a larger increase, while a false breakout or a failure to reach the WL4 will confirm a quick drop towards the  lower median line (lml) and towards the wl2.