The EUR/JPY drops on the short term and most likely will approach and reach some very important support levels because the Yen could dominate the currency market again. The Japanese currency has taken the lead on the short term as the Nikkei stock index has slipped lower after another failure to reach a dynamic resistance.

EUR/JPY failed to stabilize above a very strong dynamic resistance and to reach the 136.62 former high, that’s why the current drop is natural and expected. However, you should know that the perspective remains bullish on the Daily chart despite the current drop, it is located above some very important support levels.

Price has shown some exhaustion signs in the last months, but we didn’t receive the confirmation that the rate will start a larger corrective phase.

The Yen increases even if the Japanese data have come in mixed in the early morning, the Tade Balance dropped unexpectedly lower, the surplus was reported at 0.09T, much below the 0.27T estimate and compared to the 0.29T in the former reading period.  The Flash Manufacturing PMI has come in better than expected, it has increased from 54.0 to 54.4 points, beating the 54.3 estimate. The EUR drops despite the good numbers from the services sector.

Price drops after several false breakouts above the 150% Fibonacci line (ascending dotted line) and after the failure to reach the 23.6% retracement level again. The near-term downside obstacle will be at the 134.36 level, a valid breakdown will confirm a further drop towards the upper median line (UML) of the major red ascending pitchfork and towards the lower median line (lml) of the dark blue ascending pitchfork. The rate is somehow expected to drop and reach the lower median line (lml) after another failure to approach and reach the median line (ml) of the blue ascending pitchfork. A further increase will be confirmed only after a valid breakout above the 23.6% retracement level.