The USD/JPY has failed to garner any noteworthy upward momentum following the bottom set September 28th. The currency is drifting lower after neglecting to build upon its advance past the highly psychological 90 level. The slightly worse than expected TMI release late Wednesday night EST has been countered by much better than expected Retail Sales and Household Spending figures. Therefore, even though Japan's manufacturing sector continues to face headwinds, the rapid appreciation of the Yen is triggering consumption among Japan's populace. Unfortunately, this implies that there is a greater supply of Yen floating around and the development is not helpful for the uptrend's cause. Then again, the uptrend has very few technical or psychological backing these days. The technicals for the USD/JPY remain in a discouraging state, to say the least. The only technical cushions keeping the USD/JPY afloat are September and January 2009 lows. If the pullback accelerates again and January lows don't hold, we could see the USD/JPY testing 80 and all-time lows over the near to medium-term.
Meanwhile BoJ Minister Fujii has been running a bit of damage control to try and make up for his previous comments supporting a stronger Yen. However, Japan's new monetary and fiscal policies still favor an appreciating Yen. This week we received speculative news stating the BoJ will consider ending its emergency corporate bond purchasing programs by the end of the year. Such a monetary move is hawkish in its nature, and would likely soak up a considerable amount of liquidity. On the other hand, all we have received from the BoJ and DPJ are elements of psychological contemplation. Therefore, the psychological impact of a hawkish monetary stance may have run its course until investors see definitive action.
We maintain our negative outlook on the USD/JPY trend-wise since we have little reason to be positive on the currency pair technically, fundamentally, and psychologically. Furthermore, the USD/JPY's positive correlations aren't faring too well themselves. The S&P futures have undergone a dramatic selloff while the 30 Year T-Bond futures pop to new highs. Additionally, the technicals of the GBP/USD and EUR/USD look fairly negative themselves, particularly the Cable's. The Cable's testing the limits of its own important lows separating the currency pair from more heightened near-term losses. Lastly, gold is currently testing the patience of the strong uptrend it has built over the last few months. Therefore, the USD/JPY's positive correlations are emitting a similar negative tone. If the currency does happen to piece together a bottom, it faces multiple uptrend lines and the highly psychological 90 level.
Present Price: 89.36
Resistances: 89.80, 90.03, 90.45, 90.73, 90.96, 91.32
Supports: 89.42, 89.15, 88.89, 88.60, 88.25, 87.97
Psychological: 90, 2009 and 2008 lows