The Cable has been relatively stable despite recent volatility in most Dollar crosses along with gold flying towards $1175/oz. Investors were sending the Yen lower earlier today after a set of positive EU PMI data points along with the Dollar weakening in reaction to recent dovish statements from Fed members. However, the USD/JPY has recovered earlier losses and is pushing higher towards 89 after U.S. Existing Home Sales topped analyst expectations. Therefore, it seems the USD/JPY's correlative pattern is a combination of investor appetite for the risk trade countering comparatively loose monetary policy from the Fed. Since the Fed and the BOJ both have their benchmark rates sitting just above zero, the aforementioned forces see to be cancelling each other out and creating comparatively subdued activity in the USD/JPY. However, it will be interesting to see how the USD/JPY reacts to tomorrow's wave of data and news.
The BoJ will kick off Tuesday's session with the release of the BoJ's Monthly Report. While the BoJ has maintained its neutral monetary policy stance, the DPJ is beginning to place a bit of pressure on the BoJ to add some liquidity measures to counter deflation and aid the economy. Despite the chatter, these are just psychological forces right now, although it will be interesting to see what the monthly report reveals and how investors react. In addition to the BoJ's report, the U.S. will release its Prelim GDP number along with a host of news and data from the EU and Britain. Therefore, tomorrow's data has the potential to stir up volatility should it surprise in either direction.
Technically speaking, the USD/JPY has held strong above November lows and what is now our 2nd tier uptrend line. We've added a 1st tier uptrend line that runs through October lows should conditions deteriorate. Therefore, despite recent weakness, the USD/JPY still has what appear to be sturdy technical cushions in place. As for the topside, the currency pair faces multiple downtrend lines along with 11/18 highs and of course the highly psychological 90 level. Therefore, quite a few topside obstacles remain, especially considering the USD/JPY still has long-term downtrend forces in play.
Present Price: 88.95
Resistances: 89.02, 89.17, 89.35, 89.51, 89.64, 89.82, 90.03
Supports: 88.81, 88.72, 88.57, 88.45, 88.30, 88.18, 88.01
Psychological: 90 and October Lows