The USD/JPY drops further on the daily chart as the USDX has reached fresh new lows today. It remains to see what will happen in the upcoming period because the JP225 has shown some oversold signs. Price could be attracted by a very strong confluence area in the upcoming days.

It could drop deeper if the USDX will resume the bearish momentum. The dollar index is trading in the red and could reach new lows because we had some poor data today. I’ve said that the pair should drop further on the short term after a valid breakdown below an important dynamic support.

The Yen increased even if the Japanese data have come in mixed in the morning, the Core Machinery Orders dropped by 11.9% in December, more versus the 1.9% estimate, while the Revised Industrial Production rose by 2.9%, beating the 2.7% estimate and the 2.7% growth in the former reading period.

The USD drops further as the United States Industrial Production dropped by 0.1%, even if the traders have expected to see a 0.2% growth, the Capacity Utilization Rate was reported at 77.5%, much below the 78.0% estimate and below the 77.7% in the former reading period. The Unemployment Claims increased more than expected in the previous week, from 223K to 230K, beating the 229K estimate, while the Empire State Manufacturing Index decreased from 17.7 to 13.1 points.

Price dropped significantly and resumed the bearish momentum, it should drop much deeper in the upcoming period because is hard to believe that will rebound from the long-term 38.2% retracement level. Technically, it is expected to drop towards the third warning line (wl3) of the former descending pitchfork and towards the third warning line (WL3) of the former ascending pitchfork. I’ve said that it could be attracted by the confluence formed between these two lines, but is hard to believe that this scenario will take shape because the Nikkei has started to increase on the short term.