Yesterday, the DPJ announced the implementation of a $81 billion stimulus package to help buoy a beleagured Japanese economy. Although the DPJ's new stimulus package should give a positive boost to the nation's economy, analysts are already debating whether the $81 billion is enough to turn deflationary pressures. The Yen initially strengthened in reaction the DPJ's announcement, highlighting investor skepticism in regards to the effectiveness of the stimulus package in regards to tempering deflation. In addition to the DPJ's announcement, Japan reported that its Trade Balance widened more than expected, suggesting global demand for Japanese exports continues to recover.

However, the USD/JPY took a hit today after Japan's Final GDP printed 5 basis points below analyst expectations (0.3% vs 0.8% expected). Japan's disappointing GDP data has increased investor uncertainty in regards to the health of the global economy. Asian markets logged losses on the news and the USD/JPY sank back below 12/04 lows. Today's discouraging Final GDP figure shows us why the DPJ was so eager to announce its stimulus package while leaning on the BoJ to increase liquidity.

Meanwhile, the USD/JPY is also being dragged down by risk-averse flows in the FX market as a whole. Investors are snapping up the Dollar and the Yen after S&P downgraded its credit outlook on Spain amidst debt problems in Dubai and Greece. Investors will now be looking forward to tomorrow's BoE meeting followed by weekly Unemployment Claims and Trade Balance Data from the U.S. Furthermore, Yen investors will be focusing on Australia's key employment data releases during Thursday's Asia trading session and China's Industrial Production figure the following morning. Japan is reliant on export demand from China and Australia, meaning positive data flows over the next 24-48 hours could help allay concerns about the state of Japan's economy.

Technically speaking, the USD/JPY is trading back below its highly psychological 90 level in addition to multiple downtrend lines hanging overhead. Therefore, the currency pair still has its fair share of topside technicals to deal with before creating a more solid uptrend. That being said, longer-term downtrend forces remain. As for the downside, the USD/JPY is presently testing the patience of our 3rd and 4th tier uptrend lines along. However, the USD/JPY does have additional technical cushions waiting nearby in the form of 11/25 and 12/01 lows. Should conditions deteriorate further, the USD/JPY has our 1st and 2nd tier uptrend lines serving as supports along with November lows and the psychological 85 level.

Present Price: 87.84

Resistances: 88.07, 88.33, 88.48, 88.67, 88.86, 89.12

Supports: 87.82, 87.66, 87.49, 87.32, 87.11, 86.92

Psychological: 90, November Highs and Lows