USDJPY: The pair has returned back into its established falling channel in place for the past 8 months and now looks to head further lower having failed at the 93.74 level the previous week and followed through lower this week. The pair had in late Nov'09 halted its medium term declines at the 84.80 level and reversed sharply higher through key resistance levels at the 90.77 and the 92.31 levels to hit a high of 93.74 in early Jan'10. That recovery momentum diminished and subsequently collapsed pushing the pair to a new 2010 low of 90.59 this week. USDJPY is now vulnerable to the downside which is evidenced by its established falling channel and the fact that it is still retaining its broader longer and medium term downtrends triggered from the 124.12 level in 2007. With that said, we see further downside risk towards the 90.23 level, its Dec 21'09 low and the 88.30 level where its Dec 14'09 low is located. Below the latter will put its Dec 09'09 level at 87.35 under pressure where a decisive invalidation will clear the way for a run at the 85.85 level, its Nov 30'09 high and ultimately the 84.80 level, its 2009 low. This view remains valid while the pair trades and maintains within its defined falling channel. Its weekly RSI is bearish and pointing lower suggesting further downside weakness. However, if the 93.74 level is broken its medium to longer term downtrends will turn neutral as we expect recoveries to shape towards its Aug 18'09 high at 95.28 with an acceleration through there opening further upside towards the 97.77 level, its Aug 07'09 high ahead of the 99.40 level, its May'09 high and then its April '09 high at 101.43. Overall, USDJPY remains biased to the downside medium to longer term with the trend resumption standing g at the 84.80 level.

Weekly Chart: USDJPY