Price dropped today and seems motivated to hit fresh new lows in the upcoming period. Has come back to test and retest some important resistance levels (support turned into resistance). Is located in the seller’s territory, but maybe he needs a bearish spark to be able to extend the sell-off. USD/JPY dropped as the Nikkei stock index has plunged today after the yesterday’s minor rebound.

Right now is very important to see if the JP225 will resume the downside movement, only a further drop will force the Yen to dominate the currency market. Unfortunately the Nikkei has shown the first exhaustion signs on Monday, when has failed to close below the 19309 previous low. The perspective remains bearish on the short term, but a rebound will weaken the Yen again.

The Yen received a helping hand from the Japanese Flash Manufacturing PMI in the early morning, the indicator increased from 52.1 to 52.8 points in August, beating the 52.3 estimate, signaling a further expansion.

On the other hand, the greenback could drop much deeper on the mixed US data, the Flash Manufacturing PMI decreased from 53.3 to 52.5 points, even if the economists have forecasted an increase to 53.4 points. The New Home Sales report disappointed as well, has plunged from 610K to 571K in July, despite that the specialists have predicted an increase to 611K.

The greenback received support, only from the Flash Services PMI, which increased from 54.7 to 56.9 points, beating the 55.0 estimate.

You can see that the rate has come back to retest the broken support levels (50% retracement level, wl1 and the minor uptrend line) and now is somehow expected to drop much deeper in the upcoming period. Technically should drop if will stay much below these levels, the next downside target will be at the 61.8% retracement level, while the major near term support will be at the 38.2% retracement level. Remais to see what will happen because a Nikkei’s rebound will send the rate higher because is still moving sideways on the Daily chart.