USD/JPY rallied today and now is retesting a broken dynamic support. It remains to see what will happen in the upcoming hours and 2, 3 days because the perspective remains somehow bearish on the short term.

The today’s rebound could be only a temporary one as the USDX has squeezed in the last hours and has erased the morning losses, while the Nikkei has increased aggressively as well.

USD/JPY should drop further if it will close and stabilize somewhere below the 110.00 psychological level, so right now you should stay away and wait for a bearish confirmation.

The Nikkei stock index has failed to stay above the median line (ML) of the ascending pitchfork signaling an exhaustion and a potential downside movement. Price is retesting the ML right now. I’ve told in the previous report that we may have a further drop if the rate will stabilize below the ML.

JP225 has also failed to test and retest the 150% Fibonacci line, so a drop towards the upper median line (uml) of the descending pitchfork and towards the downside 50% Fibonacci line of the major ascending pitchfork will force the Yen to dominate the currency market.

The rate dropped after the retest of the lower median line (LML) and the 50% Fibonacci line. However, we still need a valid breakdown below the inside sliding parallel line (sl) of the descending pitchfork. You can see that this line represents a very important support, it has rejected the rate in the last weeks, but now it has managed to close below it.

So, a valid breakdown below the sliding line (sl) will announce a further drop. The next downside obstacle will be at the first warning line (WL1) of the ascending pitchfork. Personally, I believe that a valid breakdown below the sliding line (sl) will force the rate to make a breakdown below the median line (ml) as well.