The USD/JPY topped out yesterday and has been hit by a wave of downward pressure in reaction to the selloff in U.S. equities. Investors are taking profits in some of their riskier investment vehicles, including the USD/JPY. Additionally, the more negatively mixed U.S. econ data we receive, the less likely the Fed will tighten liquidity in the near future. Speaking of which, although today's Core DGO outperformed analyst expectations by three basis points, both the headline DGO number and New Home Sales data came in negatively. Furthermore, yesterday's CB Consumer Confidence reading was nothing to cheer about. Therefore, the U.S. economy is still in a funk and the recovery seems to be anemic. This is bad news for the Japanese economy since the export-reliant nation has been hit heavily by the large downturn in U.S. consumption. As a result, Japan is becoming increasingly reliant upon demand from China. If China's impressive economic growth cools off as its stimulus wanes, this could put even further downward pressure on Japan's economy. Although such events would likely favor a stronger Yen, we shouldn't get ahead of ourselves. The USD/JPY has still created some breathing room above its highly psychological 90 level and a BoJ monetary policy decision is on the way.
The BoJ will announce its monetary policy decision late Thursday/early Friday EST. Barring any large selloff in the USD/JPY between now and then, the BoJ will likely feel comfortable sticking to its newly conservative monetary stance since the USD/JPY is back above its important 90 threshold. Meanwhile, Japan will release its Prelim Industrial Production data late tonight EST. Investors are expecting a slight pullback in the reading to 1.1%.
Technically speaking, the USD/JPY is trading back below our 1st tier downtrend line, meaning the currency pair has multiple uptrend lines to overcome now. Additionally, the currency pair will have to deal with 9/24 highs along with intraday highs. As for the downside, the psychological 90 area continues to work in the USD/JPY's favor along with our 1st and 2nd tier uptrend lines. Despite today's setback, the USD/JPY still has an opportunity to right itself and salves its technicals supporting a near-term uptrend. However, investors should keep in mind there is still a debilitating, long-term downtrend force at work.
Present Price: 91.09
Resistances: 91.19, 91.30, 91.43, 91.57, 91.70, 91.85
Supports: 90.89, 90.78, 90.66, 90.47, 90.34, 90.14