The USD/JPY dropped considerably today, resuming the last two day’s bearish candles, should decrease further in the coming period if the Nikkei stock index will resume the minor downside movement. Price has squeezed a little in the last hours as the USDX is fighting hard to stay above the 100.60 level and also because the Yen was weakened by the Nikkei’s rebound.
The Nikkei stock index has edged lower in the morning, but wasn’t able to stay near the 18695 today’s low, has failed also to reach the 18645 previous low and now is trading near the 18899 yesterday’s low. We’ll see what will happen on the JP225 stock index because has broken below an important dynamic on Friday, so a further drop is somehow expected, the Yen will appreciate further if the Nikkei will drop much deeper.
The Japanese economic data have failed to impress today, the BOJ Core CPI rose only by 0.1%, less versus the 0.2% estimate and versus the 0.2% growth in the previous reading period, moreover the Monetary Base was reported at 20.3% in the last month, much below the 23.3% estimate and below the 21.4% in February.
You can see that the price has decreased significantly after the yesterday’s breakdown, but has failed to reach the 110.10 yesterday’s low, technically is expected to drop much below this level, the next downside target will be at the 50% retracement level, could be attracted by the confluence formed at the intersection between the 50% level with the fifth warning line (wl5) of the former ascending pitchfork.
The major downside targets are at the 38.25 retracement level and at the first warning line (WL1) of the major descending pitchfork, should approach these levels after the false breakout above the second warning line (WL2) and after the breakdown below the 38.2% retracement level.
The Yen is bullish on the short term, has appreciated sharply also versus the Euro and versus the Cable, personally I believe that the USD/JPY will reach the 50% retracement level very soon after the false breakout above the 38.2% retracement level.