USD/JPY rebounded in the Wednesday’s trading session as the USDX and the Nikkei increased a little. However, the currency pair remains under selling pressure on the Daily chart because is located below some very important resistance levels. The rebound could be only temporary, it could retest a dynamic resistance before will drop further. The perspective remains bearish as the USDX has lost altitude again and seems very heavy on the short term.

Technically, I’ve said that it should drop further on the short term after the valid breakdown below some important support levels and after the failure to retest a dynamic resistance (support turned into resistance). The USD needs strong support from the United States economy to be able to start a significant rebound. The US is to release only the Prelim UoM Consumer Sentiment, which is expected to increase from 95.9 to 97.0 points and the Prelim UoM Inflation Expectations, but I don’t believe that will have a significant impact.

I’ve added the Nikkei’s chart to show you why the Yen could take the lead versus all its rivals on the short term. The index dropped sharply in the yesterday’s trading session and failed once again to approach and reach the 50% Fibonacci line (ascending dotted line). Personally, I believe that we’ll have a significant retreat if the rate will reach the lower median line (LML) again.

Price dropped today and reached the 110.48 level, the failure to reach and retest the fourth warning line will signal a further drop in the upcoming period. USD/JPY is under selling pressure after the valid breakdown below the second warning line (wl2) of the ascending pitchfork and below the lower median line (lml) of the minor ascending pitchfork.

However, a further drop will be confirmed only after a valid breakdown below the 110.18 previous low, so we still need a confirmation that the rate will move down even if it is trapped below some important resistance levels.