USD/JPY drops right now as the USDX and the Nikkei are trading in the red as well. Price failed to reach a strong resistance level signaling that it could be too exhausted to jump outside the extended sideways movement.

Is very important how the USDX will react later, after the FOMC. As you already know, the Federal Reserve is expected to hike the rate once again, from 1.25% to 1.50%. The traders have expected to see the Federal Funds Rate at 1.50%, so the USD could drop on the short term because this could be already priced in.

The greenback could increase if the Economic Projections and the Press Conference will be more hawkish than expected. Maybe will be better to stay away from trading tonight as we may have a high volatility. The US President Trump is about to speak about the tax reform at the Treasury Department, in Washington, so this event could bring more volatility.

The greenback dropped in the last hours, even if the US CPI increased by 0.4%, matching expectations, but unfortunately the Core CPI surged only by 0.1%, less compared to the 0.2% estimate. On the other hand, the Yen received support from the  Japanese Core Machinery Orders, which increased by 5.0%, more versus the 3.1% estimate.

Price failed to reach the long-term 23.6% retracement level signaling that the bulls are exhausted on the short term. We’ll see what will happen in the upcoming hours because a USDX rally will force the rate to jump above the mentioned resistance level.

The bullish movement was expected after the failure to reach the lower median line (lml) of the ascending pitchfork. Technically is expected to climb much higher after the breakout above the fourth warning line (wl4) of the descending pitchfork, but we’ll see what impact will have the fundamental factors. Will become strongly bullish only after a valid breakout above the median line (ml) of the minor ascending pitchfork.