The USD/JPY has experienced a nice pop as the Dollar experiences broad-based strength. The lack of economic data is allowing investors to take profits, and in this case snatch up an oversold Yen. The DPJ's more conservative fiscal approach is worrying investors slightly that the economic recovery taking root may be compromised if stimulus is withdrawn. The psychological uncertainty is giving investors a good reason to buy up a battered USD/JPY. However, nothing has changed fundamentally, and the DPJ's conservative approach should actually favor a stronger Yen in the long run. Therefore, the USD/JPY's present strength isn't convincing enough for us to change our bearish outlook trend-wise. We've readjusted our trend lines, and our 3rd and 5th tier downtrend lines appear to be the more significant technical barriers since they run through September and 8/24 highs, respectfully. Meanwhile, we notice technical supports in all of the USD/JPY's negative correlations. Hence, with Japan on a National Holiday for the next two sessions, investors may wait for Wednesday's wave of econ data and central bank meetings before making any technically significant decisions.
Japan will join the party Wednesday by releasing its Trade Balance. We believe Japan's Trade Balance will come in stronger than expected since China's TEU data continues to grow with the country's economic recovery running on schedule. Additionally, recent data from the U.S. has been stronger than expected; indicating demand for Japanese exports likely improved since the last time we received Trade Balance data. An outperformance of Japan's Trade Balance data would likely place further downward pressure on the USD/JPY, corresponding with our expectations for strong EU PMI data and resulting outperformance in the Euro. In all, we maintain our negative outlook trend-wise on the USD/JPY until the currency pair's aforementioned topside technical barriers are knocked out. As for the downside, our multiple uptrend lines should serve as reliable cushions while the highly psychological 90 level waits in the distance.
Present Price: 92.26
Resistances: 92.51, 92.75, 92.93, 93.16, 93.31
Supports: 92.23, 92.04, 91.84, 91.61, 91.42