USD/JPY drops aggressively and extends the yesterday’s bearish candle. Is going down as the USD is weakened by the USDX’s impressive drop. Price is trading in the red on the short term and has finally managed to escape from the extended sideways movement.

I’ve said in the last weeks that technically, is expected to drop further in the upcoming period also because the Nikkei stock index was expected to drop further as well.

The Nikkei is trading in the red and should resume the sell-off even if has touched a dynamic support in the morning.

The Yen dominates the currency pair despite the mixed Japanese data, the Final GDP rose by 0.6% in the second quarter, less versus the 0.7% estimate and compared to the 1.0% growth in the former reading period. The Bank Lending surged by 3.2%, less versus the 3.3% estimate, while the Final GDP Price Index dropped by 0.4%, matching expectations. The Yen was helped by the Current Account, which increased to 2.03T, from 1.52T, exceeding the 1.65T estimate, while the Economy Watchers Sentiment remained steady at 49.7.

The next downside target will be at the 61.8% retracement level. The current drop is natural after the retest of the warning line (wl1) and after the failure to retest the third warning line (WL3) of the major descending pitchfork.

Technically is somehow expected to approach the second warning line (WL2) of the major descending pitchfork, but only if will ignore the 61.8% and the 38.2% retracement levels. Price is expected to drop towards the second warning line (wl2) as well after the valid breakdown below the wl1.

We have an aggressive breakdown below the 108.12 and I don’t believe that will turn back to retest it. Only some very good US data will force it to rebound and to recover after the immense drop. USD/JPY is on a declining path as long as is trapped between the WL3 and the WL2, a bullish perspective is off the cards right now.