The USD/JPY drops like a rock on the short term and seems unstoppable right now. It should reach fresh new lows in the upcoming hours as the Nikkei and the USDX dropped significantly today. I’ve said in the last days that the rate should drop further on the daily chart because is trapped below some important dynamic resistance and because the JP225 index is still under selling pressure.
The Nikkei dropped sharply in the previous week as the stock market crashed on the short term after impressive upwards movement. Personally, I’m expecting to see a minor rebound on the Nikkei in the upcoming days because is hard to believe that it will drop below the 20539 former low. However, the index has closed the yesterday’s gap up, signaling a high selling pressure.
A Nikkei’s rebound will force the Yen to depreciate a little versus all its rivals and not only against the USD.
The Yen increased also because has received support from the early morning Japanese data, the PPI increased by 2.7% in the previous month, matching expectations, while the Prelim Machine Tool Orders have increased by 48.8%, more versus the 48.3% in the former reading period.
The USDX is trading in the red and wasn’t impressed by the US NFIB Small Business Index, which increased from 104.9 to 106.9 points, more compared to the 106.2 estimate.
The pair drops aggressively after the breakdown below the 350% Fibonacci line (ascending dotted line). I’ve said in the previous week that the rate will take out the support from the 350% line if will touch it. Price dropped through the first warning line (wl1) of the minor ascending pitchfork and seems determined to approach the 38.2% retracement level. Support can be found on the third warning line (wl3) of the ascending pitchfork and at the third warning line (wl3) of the descending channel.