The EUR/JPY dropped significantly and has reached a strong dynamic support. Technically, it is expected to drop further in the upcoming period after the failure to reach and retest some very important resistance levels.

The Yen dominates the currency market on the short term as the Nikkei stock index has turned to the downside again on the short term. I’ve said in the previous report that the rate should drop significantly in the upcoming period because the JP225 is too exhausted to resume the upside movement.

The EUR drops further as the Euro-zone data have failed to impress earlier. The Retail Sales have increased only by 0.1%, less versus the 0.5% estimate and versus the 0.3% growth in the former reading period, while the Final Services PMI dropped from 55.0 points to 54.7 points signaling that the expansion has slowed down. The German Final Services PMI decreased from 54.1 to 53.0 points, much below the 54.1 estimate, the French Final Services PMI has remained steady at 57.4 points, matching expectations, while the Italian Services PMI remains unchanged as well at 52.6 points, even if the traders have expected to see an increase towards the 53.0 points.

Moreover, the Spanish Services PMI has slipped from 56.2 points to 55.6 points, much below the 56.1 estimate, while the Spanish Unemployment Change was reported at -86.7K, much higher versus the -100.2K estimate.

The rate dropped sharply after the several failures to reach and retest the 150% Fibonacci line (ascending dotted line) of the ascending pitchfork. Price is pressuring the first warning line (wl1) of the ascending pitchfork, so a valid breakdown will signal a further drop towards the median line (ML) of the red ascending pitchfork and towards the 38.2% retracement level. Actually, it could be attracted by the confluence area formed between these levels.

A valid breakdown below the median line (ML) will confirm a major drop in the upcoming weeks and months.