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USD/JPY has rebounded on the short term as the USD was lifted by the USDX's bounce back, while the yen was weakened by the Nikkei's rebound. The minor increase could give us a chance to go short as well, but we still have to wait for a confirmation that the pair will resume the corrective phase.
The pair has found temporary support and now it has come back to retest a dynamic resistance, the Japanese Yen could take the lead again if the Nikkei will drop and if the USDX will stay down. USD/JPY is trading at 108.25, the current increase is natural after the last drop, another lower low will confirm a further drop.
Now, it is very important to see what will happen and how the price will react after the inside sliding line (SL) retest. USD/JPY could drop much deeper if it stays below the inside sliding line (SL) and if the price makes a valid breakdown below the 38.2% retracement level and below the median line (ML) of the descending pitchfork.
The inside sliding parallel line (SL) has represented dynamic support in the past, the support has turned into resistance, so a rejection from this line could signal a further decrease. A larger rebound will be confirmed if the price stays away from the median line (ML) and if it closes and stabilizes above the sliding line (SL).
A valid breakdown below the median line (ML) and another lower low, a drop below the 107.12, will validate a drop towards the 61.8% retracement level and towards the lower median line (LML) of the descending pitchfork. The selling pressure is still high as long as USD/JPY stays below the SL.
USD/JPY will increase further on the short term before it will drop again if it closes and stabilizes above the inside sliding line (SL). The upper median line (UML) could attract the price if USD/JPY closes and stabilizes above the SL or if it fails to approach and reach the median line (ML) again. A larger correction could also be invalidated by another false breakdown below the median line (ML) or by a further increase and a valid breakout above the upper median line (UML).
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