The USD/JPY is consolidating around our 2nd tier downtrend line while maintaining its upward bias from last week. Positive U.S. Q3 earnings and econ data have given investors renewed faith in the U.S. economy as a whole, allowing investors to feel more comfortable with the USD/JPY risk trade. By sending the USD/JPY higher last week, investors are showing their support for the belief that the Fed will be able to raise rates before the BoJ, making the Yen the preferred funding currency once again. The USD/JPY has successfully created some breathing room between present price and the psychological 90 level while knocking down a few downtrend lines. However, the currency pair still faces quite a few topside technical barriers to overcome considering the extent of its pullback from August highs.
Investors will get a better idea of the BoJ's current monetary stance towards the end of the week when the central bank makes its scheduled policy decision late Thursday/early Friday EST. The recent upturn in the USD/JPY supports the BoJ's more hawkish monetary stance. Therefore, analysts are expecting the BoJ will stick to its tighter approach towards monetary policy considering the USD/JPY is back above 92. Japan will roll out a couple econ releases between now and then, including Retail Sales late Tuesday EST followed by Prelim Industrial Production late Wednesday EST. While investors are expecting an improvement in Retail Sales due to the appreciation of the Yen, Prelim Industrial Production should carry more weight since Japan's economy is export-focused.
Technically speaking, the USD/JPY's potential encounter with our 3rd tier downtrend line is an important development since it runs through 8/28 highs. Our 3rd and 4th tier downtrend lines carry a heavier weight since they represent the USD/JPY's ability to extend its present upward movement towards the psychological 95 level. Besides our downtrend lines, 9/21 highs could serve as a formidable technical barrier should they be reached. That being said, the USD/JPY's topside obstacles are wearing thin, and an accelerated near-term breakout is becoming more probable. As for the downside, the USD/JPY's recent run has created several technical cushions, including multiple uptrend lines along with 10/23, 10/22, 10/21, and 10/20 lows. Speaking of which, this set of higher lows is normally a positive technical sign trend-wise. .
Present Price: 91.90
Resistances: 91.93, 92.05, 92.18, 92.38, 92.51, 92.67
Supports: 91.70, 91.57, 91.41, 91.19, 91.08, 90.88