The USD/JPY’s recent rally seems to be topping out as investors lock-in profits on the Dollar. Today’s weakness in the USD/JPY comes despite a reiteration from the BoJ that the central bank is intent on fighting deflation, implying an accommodative monetary policy for the foreseeable future. Such a hawkish monetary stance is positive news for the USD/JPY so long as U.S. economic data continues to recover over the near-term. That being said, yesterday’s U.S. data set was discouraging, particularly the pullback in New Home Sales. Yesterday’s negative U.S. economic data is the culprit behind present profit-taking in the Dollar, and it will be interesting to see how the Greenback reactions to today’s releases. Today the U.S. will print weekly Unemployment Claims and Durable Goods Orders. The U.S. DGO data could be a market mover for the USD/JPY since Japan’s economy is dependent upon export demand to the U.S. Japan will join the data wire with Household Spending and Tokyo Core CPI during the evening trading session. Investors will be honing in on Japan’s Tokyo CPI data since a weak number could support the BoJ’s recent hawkish monetary policy statements. Meanwhile, activity should cool down as the trading session progresses as investors check out for the Christmas holiday.
Technically speaking, the USD/JPY’s movement above our 4th tier downtrend line is an encouraging development since it runs through 8/13 levels, or the psychological 95 area. Meanwhile, the USD/JPY does face topside technical barriers in the form of our 5th tier downtrend line, 10/26 highs, and 9/21 highs. Furthermore, the psychological 90 area could still play a role considering how tough the trading zone has been to overcome in the past. As for the downside, the USD/JPY has multiple uptrend lines serving as technical cushions along with 12/21, 12/18, and 12/14 lows. Meanwhile, the psychological 90 level should serve as a technical cushion should it be tested.
Present Price: 91.53
Resistances: 91.47, 91.59, 91.80, 91.94, 92.04, 92.17, 92.35
Supports: 91.22, 91.08, 90.92, 90.76, 90.58, 90.36
Psychological: 90, October Highs