The USD/JPY decreased today, but failed to stay lower as the USDX has managed to stay much above the 88.43 former low. The Yen wasn’t impressed by the Nikkei’s massive drop, the index has plunged much below a strong dynamic support and seems motivated to reach another downside target.

A Nikkei’s further drop will force the Yen to increase versus its rivals, the EUR/JPY and the GBP/JPY have reached fresh new lows today. The USD/JPY could lose altitude if the USDX will resume the bearish movement. The index has found temporary support and now has come higher to test and retest a broken support (support turned into resistance).

The dollar index remains under immense selling pressure on the short term because is trapped below some very important resistance levels.

The Yen increased a little in the morning because we had some good data from Japan. The BOJ Core CPI rose by 0.7%, beating the 0.5% estimate and the 0.6% growth in the former reading period. The Retail Sales have increased by 3.6% in the previous month, beating the 2.1% estimate and the 2.1% growth in the former reading period. Unfortunately, the Unemployment Rate increased unexpectedly from 2.7% to 2.8%, beating the 2.7% estimate.

The price dropped significantly in the last weeks and now is almost to reach the 350% Fibonacci line (ascending dotted line) and the first warning line (wl1) of the ascending pitchfork.

Is very important to see what will really happen on the USDX and on the Nikkei in the upcoming days. Technically, the pair is still expected to drop in the upcoming period, but we cannot exclude a minor rebound. A failure to reach the near-term support levels will signal a bounce back on the short term, while a valid breakdown below the mentioned support levels will confirm a further drop. Support can be found at the 38.2% retracement level and at the third warning line (WL3) of the former descending pitchfork.