The USD/JPY is popping nicely above October lows after Core Machinery Orders data came in lighter than analyst expectations. Broad-based Dollar strength is only helping the USD/JPY head higher as we recognize pullbacks in both the GBP/USD and EUR/USD. Hence, investors are still a bit cautious despite the optimism resulting from the RBA's monetary shock and consequent breakout in gold. The USD/JPY has responded by creating some distance between price and our important 1st tier uptrend line. Despite the potential for more immediate-term gains in the USD/JPY, the currency pair still faces our 2nd tier uptrend and downtrend lines along with the highly psychological 90 level. Therefore, investors should refrain from becoming too optimistic in reaction to today's bounce. The longer-term downtrend line persists and a pop on oversold conditions is healthy. As for the downside, the USD/JPY only has our 1st tier uptrend and October lows separating the currency pair from a retest of key January lows.

The USD/JPY's near-term path will rely upon the combination of important econ data next week, Q3 earnings reports and outlooks, and the BoJ's monetary policy decision on Tuesday. Volatility should increase considerably before Tuesday's meeting since great uncertainty surrounds the true monetary stance of the BoJ. Tuesday's decision will be the first under the leadership of Minister Fujii. Though we don't expect the BoJ to alter its monetary policy on Tuesday, investors will carefully analyze Fujii's comments. Investors will look to see if Fujii reveals whether the BoJ is comfortable with the Yen appreciating further and if/when the central bank would intervene to defend exporters. However, we don't expect too much clarity, only further haze and uncertainty. Meanwhile, Monday's trading session should be quiet since U.S. markets will be closed for a banking holiday.

Present Price: 89.33

Resistances: 89.45, 89.68, 89.82, 89.97, 90.21, 90.43

Supports: 89.16, 88.91, 88.63, 88.43, 88.16, 88.00

Psychological: 90, 2009 and 2008 lows