FX.co ★ USD/JPY: more declines in cards, FOMC decisive tomorrow

The USD/JPY pair crashed today after reaching a resistance zone after the US inflation data weakened the greenback. The Dollar Index's sell-off and the Yen Futures' rally forced the pair to register a massive drop.

As you already know, the US CPI and Core CPI came in worse than expected earlier today punishing the USD. Tomorrow, Japan is to release the Revised Industrial Production, Tankan Non-Manufacturing Index, Tankan Manufacturing Index, and Core Machinery Orders.

Still, the FOMC represents the most important event tomorrow. The Federal Funds Rate is expected to be increased from 4.00% to 4.50%.

USD/JPY Massive Drop!

Technically, after its massive drop, the rate could come back to test and retest the 135.60 - 135.98 area. The rate rebounded but its failure to take out 137.85 and to retest the uptrend line in the last attempt signaled exhausted buyers.

Now, it has crashed and ignored the weekly pivot point of 136.18 and the uptrend line. A minor rebound could bring us new short opportunities.

USD/JPY Outlook!

After its sell-off, a rebound is natural. Testing and retesting the 135.96 - 135.60 area, registering false breakouts could announce a new downside movement. Also, a new lower low, dropping and closing below 134.65 activates more declines at least towards the 133.61 lower low. This is seen as a selling signal.