The USD/JPY is participating in today's broad-based weakness of the Dollar following the RBA's decision to raise its benchmark rate by 25 basis points. Though an incremental increase, the RBA's policy delivered a monetary shock and investors are beginning to trade with more of an exit-strategy mentality. The exit from global liquidity measures doesn't appear to bode well for the Dollar's longer-term outlook considering the reaction we've seen across FX markets today and gold's sprint to new all-time highs. The lack of Japanese economic indicators combined with the uncertainty surrounding Minister Fujii's monetary stance has allowed the USD/JPY to take a hit today. The USD/JPY is re-approaching critical levels including September and January lows. A failure of support from these lows would likely accelerate the USD/JPY's immediate-term downward momentum. However, should such an even materialize we would expect Fujii to defend the currency by selling a large lot of Yen.
Speculation aside, we have little reason to alter our negative outlook on the USD/JPY. It seems the USD/JPY is bound to suffer whether broad-based Dollar weakness continues or the S&P futures pull back again. Countering forces would be very negative Japanese economic data combined with predominantly positive U.S. econ numbers. Also, Minister Fujii can influence the currency pair through either psychological techniques are concrete action. Otherwise, the USD/JPY's downtrend remains in the driver's seat.
Technically speaking, September and January lows serve as important cushions along with our 1st tier uptrend line. As for the topside, the USD/JPY faces multiple downtrend lines along with the highly psychological 90 level. The USD/JPY clearly has far more technical obstacles to the topside than the downside over the near-term, allowing for a higher probability of more downward movements.
Present Price: 88.73
Resistances: 89.12, 89.67, 89.94, 90.14, 90.45, 90.74
Supports: 88.60, 88.25, 87.97, 87.63, 87.12, 86.80
Psychological: 90, 2009 and 2008 lows