USD/JPY dropped like a rock as the Yen was lifted by the Nikkei’s massive drop. Price turned to the downside and most likely it will approach and reach new lows after today’s temporary rebound. The rate could only test and retest the near-term resistance line before it will resume the downside movement.
I’ve told you in the previous report that the pair has shown an exhaustion on the Daily chart. However, it is still premature to talk about a significant drop, so you should wait for another confirmation if you want to keep your short position on the medium term.
JP225 failed to stay higher and it could drop much deeper in the upcoming period. A further drop will force the Yen to increase and to dominate the currency market. I’ve said in a previous report that the NIkkei’s rebound could be only temporary.
You can see that the index has closed the former gap up and has reached the sliding line (SL). It has increased today, that’s why the USD/JPY has increased. Nikkei is trying to close the today’s gap down, but personally, I believe that the rate will drop again and it will force the Yen to increase.
A valid breakdown below the warning line (wl2) of the ascending pitchfork it will signal a further drop on the short term.
USD/JPY failed to stay above the median line (ML) of the ascending pitchfork and above the first warning line (wl1) of the descending pitchfork. I’ve told you that we may have an important bearish movement if the price will get back below the wl1 and below the ML.
Price is trying to test and retest the warning line (wl1), a false breakout or a rejection will send the rate down. It could fail to retest this dynamic resistance and could drop very quickly.
It could be attracted by the confluence area formed between the 150% line and the downside 50% Fibonacci line of the ascending pitchfork. Only a valid breakdown below the 50% line it will announce a larger drop.