The USD/JPY decreased today and erased the Friday’s gains, but the rate has squeezed in the last hours and seems motivated to stay above the 106.50 psychological level. However, you should know that the rate remains under selling pressure on the Daily chart, it is trapped below a very strong dynamic resistance.

It is very important to see what will really happen with the Nikkei and the USDX in the upcoming days because an increase will send the USD/JPY much higher on the short term.

The Yen should drop after the Nikkei’s impressive rally, you can see that it has opened with a gap up today and resumed the Friday’s growth. The rate has managed to jump through the confluence area formed between the warning line (WL1) of the major ascending pitchfork with the median line (ml) of the minor descending pitchfork.

A valid breakout will accelerate the bullish momentum, we may have a buying opportunity on the JP225 if the rate will retest the WL1. The current rebound is natural after the false breakdown below the lower median line (lml) of the descending pitchfork and more important after the failure to close near this level.

The rate could be attracted by the upper median line (uml) of the descending pitchfork if will stabilize above the broken levels.

You can see that the rate has failed to reach the third warning line (wl3) of the former major ascending pitchfork signaling an oversold. We’ll see what will happen because it has made a false breakout above the 450% Fibonacci line (descending dotted line). It is still under selling pressure, it should take out the dynamic support from the mentioned warning line (wl1) if will reach it and could drop towards the third warning line (WL3) of the former major descending pitchfork. We’ll have a larger rebound only if the Nikkei stock index will jump much higher in the upcoming period.