The USD/JPY experienced a solid rally during the Asia trading sessions after the BoJ called an emergency meeting to confront a strengthening Yen and deflationary pressures. The prospect of governmental intervention in the currency markets resulted in a selloff in the Yen with investors expecting either a large purchase Yen or QE measures. However, the USD/JPY has since relinquished most of its intraday gains after the BoJ decided to make 10 trillion Yen available for loans to Japanese banks at the BoJ's 0.1% benchmark rate, or essentially free loans. Investors don't seem too impressed by the results of the emergency meeting considering the post-meeting reaction of the USD/JPY. However, we will have to see how the day pans out as investors digest today's events. Meanwhile, China's Manufacturing PMI data printed in line with analyst expectations and the RBA decided to increase its benchmark rate by another 25 basis points. The positive signals from these other major Pacific economies increases the outlook in demand for Japanese exports and services despite the Yen's recent wave of appreciation. Such developments seem to be benefitting the Yen as the USD/JPY drops back towards Monday's levels.
Technically speaking, 85 seems to be the new psychological benchmark with 90 hanging far overhead. Should conditions deteriorate below 85, we notice that the 82.50-85 area proved to be a strong support area during the Spring/Summer of 1995. Therefore, the USD/JPY could experience similar support should the currency pair's downturn continue. As for the topside, there are multiple downtrend lines serving as technical barriers along with intraday highs as the long-term downtrend bears down on price. Hence, the USD/JPY has its work cut out for it to the topside should the currency pair want to re-challenge the highly psychological 90 level.
Present Price: 86.85
Resistances: 87.04, 87.22, 87.51, 87.72, 87.82, 87.94, 88.13
Supports: 86.80, 86.64, 86.49, 86.30, 86.14, 85.99, 85.74, 85.51
Psychological: 85, 90, 80