The USD/JPY has continued its consolidation around 92 and has perked above our 2nd tier downtrend line in the process. However, the currency pair is having a little trouble breaking through our 3rd tier downtrend line after tapping it earlier today. Meanwhile, the USD/JPY's topside run is reaching an important juncture with our 4th tier downtrend line and 9/21 highs nearby. 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. That being said, the USD/JPY's topside obstacles are wearing thin, and the probability of an accelerated near-term breakout is increasing. However, investors should keep in mind that a debilitating, long-term downtrend is still in effect. Hence, the potential to reverse into its downtrend remains a possibility. As for the downside, the USD/JPY's recent run has created several technical cushions, including multiple uptrend lines along with 10/26, 10/23, 10/22, and 10/21 lows. Speaking of which, this set of higher lows is normally a positive technical sign trend-wise.
Meanwhile, volatility in FX markets should increase as the week progresses since the U.S. will be releasing more key economic data, including tomorrow's DGO and New Home Sales data. The DGO number is of particular importance to export-reliant economies such as Japan. However, the USD/JPY's ultimate focus will likely be on late Thursday/early Friday's BoJ monetary policy decision. The BoJ has held a more hawkish monetary policy stance since the DPJ took power, and there's little reason to expect this to change on Friday since the USD/JPY has created some breathing room between present price and 90. However, there's a lot of data between now and the BoJ's decision, and with the S&P futures reaching up 1st tier uptrend line the Dollar has the potential to realize further immediate-term gains. Therefore, investors should keep a close eye on the USD/JPY's correlation with U.S. equities along with the S&P's reaction to upcoming econ data.
Present Price: 92.08
Resistances: 92.18, 92.35, 92.57, 92.77, 92.93, 93.17
Supports: 91.91, 91.80, 91.70, 91.57, 91.41, 91.24