The USD/JPY dropped significantly in the last hours and erased the morning gains. Price seems poised to drop much deeper if the rate will confirm another false breakout above some very important resistance levels. I’ve said in the previous week that we may have to wait for a confirmation that the rate will climb much higher in the upcoming period because the bulls seem exhausted.

The USD lost significant ground versus the Yen as the USDX and the Nikkei have slipped lower. We’ll see what will really happen on the JP225 and on the USDX because the perspective remains bullish on the short term.

I’ve added the USDX’s chart to show you what could happen with the USD on the short term. You can see that the dollar index has retested the sliding parallel line (sl) of the minor ascending pitchfork, but failed to stay near the 95.12 today’s high and now could drop towards the 250% Fibonacci line (ascending dotted line), where he could find support again. Technically it was expected to climb much higher after the breakout above the median line (ML) of the major descending pitchfork and above the Inverse Head and Shoulders neckline. I’ve said that the index could move in range before will climb towards the upper median line (UML) of the descending pitchfork and towards the 97 level.

Looks like that the USD/JPY made another false breakout above the median line (ml) of the minor ascending pitchfork and above the 23.6% retracement level, signaling another leg lower. Has reached the fourth warning line (WL4) of the major descending pitchfork. A drop towards the 250% Fibonacci line seems favored at this moment, price could develop a minor Rising Wedge pattern on the short term. I’ve said in the previous weeks that the rate will take out the 250% Fibonacci line if will reach it, a breakdown below it will send the rate tumbling towards the lower median line (lml) of the minor ascending pitchfork.