The USD/JPY is heading south again after failing to break our 2nd tier uptrend line. The psychological games continue at central banks across the globe, and the BoJ is no exception. The BoJ revised their previous hawkish statements by saying they would consider intervening if the Yen appreciated to unhealthy level. However, what exactly these levels are remains to be seen. We believe the BoJ's most recent statement was made with the intention to appease manufacturers and exporters when the true intention is likely to have a stronger Yen over the long term. Strength in the USD/JPY from the BoJ's comments didn't last long. Today Bloomberg released an article stating 'The Bank of Japan may decide as soon as next month to let its emergency corporate-debt buying programs expire...' If this is true, the BoJ is clearly favoring a hawkish monetary policy. The USD/JPY is weakening below 90 once again in reaction to the news.
In addition to the flood of psychological monetary news, America's CB Consumer Confidence number came in below analyst expectations yesterday. This weak CB number tags onto the disappointing durable goods data last Friday, indicating U.S. consumption continues to drag. The continual deterioration of U.S. consumption isn't good news for a beleaguered Japanese manufacturing industry. In addition to the disappointing U.S. data, Japan's Industrial Production and CPI numbers both came in a basis point below analyst expectations. The combination of declining prices and industrial production coupled with a more hawkish monetary stance from the BoJ is certainly a troublesome development for Japan's economy. Therefore, all eyes will be on Japan's TMI data Wednesday night PST. It's hard to believe Japan's TMI will come in positively considering the state of global consumption, but we will have to wait and see.
Technically speaking, we have little reason to be positive on the USD/JPY trend-wise. The currency pair continues to travel south from all of our note-worthy uptrend lines. The only technicals working in the USD/JPY's favor right now are intraday and January 2009 lows. However, we did previously note that the 88.50-90 level should prove to be a reliable supportive trading range. Therefore, we wouldn't be surprised to see the USD/JPY hang in this area over the next 24-48 hours. On the other hand, traders should remain on their toes since the FX markets are very dynamic right now. The question becomes whether U.S. equities and gold can keep upward momentum intact. As for the topside, the USD/JPY faces numerous downtrend lines along with the highly psychological 90 level. Therefore, the USD/JPY has quite a few large obstacles to overcome to the topside.
Present Price: 89.78
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