The Japanese Yen rallies versus the USD even if the Nikkei stock index is trading in the green. The pair drops like a rock as the USD is weakened by the USDX's sell-off. USD depreciates ahead of the FOMC meeting, the FED is expected to maintain the Federal Funds Rate steady at 0.25%, a neutral or a hawkish speech will boost the USD which will dominate the currency market again.
Unfortunately, some poor US data and a dovish FED could bring more selling pressure on the dollar. The Federal Reserve has taken unprecedented measures to fight the COVID-19 effects, USD/JPY could rebound only if the USDX will be boosted by the FOMC today.
Technically, USD/JPY is under massive pressure after the false upside breakout from the triangle and after the price has managed to stabilize below the median line (ML). I've said in a previous analysis that a false upside breakout will signal a valid breakdown.
USD/JPY has reached a very strong dynamic support at the sliding parallel line (SL), so only a valid breakdown below this line will validate a larger drop. A false breakdown below the SL and below the 50% level followed by an aggressive rally could announce a reversal and a potential leg higher.
- TRADING RECOMMENDATIONS
You can notice that the inside sliding line (SL) of the descending pitchfork represents a very strong dynamic support, but a valid breakdown will validate a further drop towards the 61.8% retracement level and towards the lower median line (LML). I believe that this scenario will take shape if the USDX and the Nikkei will drop.
USD/JPY is traded at 106.43 and is under massive selling pressure after the valid breakdown from the triangle pattern and after it has made another lower low. However, you could search for long opportunities as well in the short term if USD/JPY will register only a false breakdown below the SL, if the price will develop a reversal pattern on the 50% level.
