The USD/JPY is retrenching above 10/27 and 9/28 lows as gold and the AUD/USD begin to top out. However, the GBP/USD and EUR/USD are strengthening today, normally a negative catalyst for the USD/JPY. The USD/JPY appears to be on a path of its own for right now since investors are debating whether to send the currency pair below our 1st tier uptrend line towards a retest of January lows. Although present consolidation is encouraging and may continue over the immediate-term, the USD/JPY is still stuck in its debilitating downtrend. Huge breakouts in gold and the AUD/USD are sending a message supporting a broad-based Dollar depreciation over the longer-term. Though BoJ Minister Fujii reversed his hawkish tone in favor of supporting the Yen should it strengthen to critical levels, we are not sure exactly what levels Fujii is comfortable with. Therefore, the Yen's appreciation should continue so long as the BoJ's future monetary policy remains hazy. We can tell you that a failure of January lows would send up a red flag and pressure the BoJ to intervene.

Meanwhile, Japan will release Core Machinery Orders data late Thursday EST. The CMO number will be closely watched since it's a leading indicator. A stronger than expected number would likely result in further appreciation of the Yen since it would support Fujii's hesitance in participating in QE. A solid number wouldn't be surprising since Japan's #1 trading partner, China, continues to experience strong economic growth. In addition to the CMO number U.S. Q3 earnings will play a large role in determining the near-term path of the Dollar. Encouraging Q3 results would lead investors away from the Dollar and place further downward pressure on the USD/JPY. Lastly, the convincing breakouts in gold and the AUD/USD spell a longer-term depreciation of the Dollar. Hence, there is little reason to change our negative outlook on the USD/JPY trend-wise.

Technically speaking, 10/27 and 9/28 lows should continue to serve as an immediate-term technical cushion. However, a failure of these lows and our 1st tier uptrend line would ultimately lead to a retest of January lows. As for the topside, the USD/JPY faces multiple downtrend lines along with 10/7 and 10/5 highs. Additionally, the psychological 90 level is now working against the USD/JPY.

Present Price: 88.41

Resistances: 88.60, 88.85, 89.20, 89.45, 89.97, 90.30

Supports: 88.25, 87.97, 87.63, 87.12, 86.80, 86.13

Psychological: 90, 2009 and 2008 lows