A selloff is taking place in the riskier FX pairs and the USD/JPY is following suit, telling us investors prefer the Yen over the Dollar as a safe haven right now. Today's strength in the Yen also stems from the BoJ's decision to end a couple of its bond purchasing programs in an effort to tighten liquidity. Today's monetary policy falls in line with the BoJ's more conservative stance since the DPJ took office. Furthermore, the BoJ was likely encouraged by the USD/JPY's recent solid performance above its important 90 threshold. However, today's larger than expected decline in both the Tokyo Core CPI and Household Spending tell us the BoJ can't be too conservative with its monetary policy since deflationary pressures are still bearing down on consumer prices. Additionally, even though this week's Industrial Production number printed better than analyst expectations, the 1.4% rate of growth is unsubstantial compared to the huge declines we witnessed during late 2008/early 2009. Hence, Japan's economy still faces a long path to recovery.
Meanwhile, investors should keep an eye on the S&P futures and monitor their ability to sustain yesterday's rally. The USD/JPY has been behaving in a more consistent, positive correlation with U.S. equities, although it's uncertain how long this will last. Therefore, investors can also compare the USD/JPY to the S&P's stronger correlations, including the EUR/USD, AUD/USD, and gold. Japanese markets will be closed on Monday for a banking holiday, meaning the Asia session trading could be light. Techncially speaking, the USD/JPY's inability to test 10/26 highs yesterday was a bit discouraging as far as a near-term uptrend is concerned. However, the currency pair does have a couple more uptrend lines to fall back on along with 10/20 lows and the psychological 90 level. As for the topside, our 2nd and 3rd tier downtrend lines bear overhead along with 10/26 and 9/21 highs.
Present Price: 90.86
Resistances: 91.22, 91.32, 91.44, 91.61, 91.78
Supports: 90.83, 90.68, 90.49, 90.34, 90.21