The USD/JPY has tumbled back below the psychological 90 level and previous January lows in a flood of negative developments in both the East and the West. During the Asia trading session investors headed for safety after China's major banks indicated they are taking the central banks' new hawkish monetary stance seriously, benefitting the Yen in the process. Additionally, the BoJ kept its monetary policy unchanged despite external pressure from Finance Minister Kan in regards to fighting deflationary forces. Therefore, it seems the BoJ is not comfortable with intervening at present levels, especially considering the S&P just lowered Japan's credit rating outlook. The S&P's downgrade has delivered another blow to investor confidence and the Yen is benefitting as investors exit the risk trade. Moving to the West, the UK printed a Prelim GDP figure below analyst expectations. The negative GDP number led to a wave of risk aversion, a negative development for the USD/JPY. Attention now shifts to the U.S. with the release of CB Consumer Confidence and it will be interesting to see how FX markets react since yesterday's disappointing Existing Home Sales number led to broad-based weakness in the Greenback. Japan will print its Trade Balance during tomorrow's Asia trading session. Should the Trade Balance yield a stronger than expected surplus this could result in another round of Yen purchases. Meanwhile, volatility should remain at a heightened state for the next couple trading sessions since the U.S. will release New Home Sales tomorrow followed by the Fed's monetary policy decision.
Technically speaking, the USD/JPY has our 1st and 2nd tier uptrend lines serving as technical cushions along with 12/18 and 12/14 lows. As for the topside, the USD/JPY faces multiple downtrend lines along with intraday and 12/18 highs. Furthermore, the psychological 90 level may work against the USD/JPY's favor should conditions deteriorate further.
Present Price: 89.47
Resistances: 89.69, 89.97, 90.14, 90.37, 90.64, 90.77
Supports: 89.40, 89.21, 89.02, 88.85, 88.62, 88.28
Psychological: 90, December highs and lows