USD/JPY Weakens Slight as Gold Gains and Dollar Weakens

By IBTimes Staff Reporter | January 04 2010 10:36 AM

The USD/JPY is trading off December highs as the Dollar weakens across the board and gold bounces back above $1100/oz. Hence, investors are showing a preference for the risk trading today following a positive set of economic data from the UK. Furthermore, the Development Bank of Japan announced it is extending a $2.2 billion credit line to Japan Airlines, thwarting fears of bankruptcy which sent the Yen tumbling last week. Meanwhile, investors are looking on to today’s U.S. ISM Manufacturing PMI figure. Investors may be encouraged to buy up the USD/JPY again should America’s economic data outperform, while weakness in the U.S. economy could send investors back to the Yen for some safety. However, investors are likely focusing in on Wednesday’s U.S. Non-Farm Employment Change number. The recovery in U.S. employment data triggered the Dollar’s run during December. Therefore, this week’s employment data could carry some additional weight. Japan will be quiet on the data-front this week, leaving its movements up to momentum and correlation. Hence, we’ll monitor how the Yen behaves with the Dollar’s broad-based reaction to upcoming data releases.

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Technically speaking, the USD/JPY overcame some notable topside barriers during the month of December, most notably the psychological 90 level and a few heavily-weighted downtrend lines. Speaking of downtrend lines, our 2nd tier downtrend line could prove to be a key barrier since it runs through August ’09 highs. Hence, an eclipse of our 2nd tier could potentially yield a medium-term run towards the 97.50 area. Meanwhile, the USD/JPY does face multiple downtrend lines along with September highs and the psychological 95 zone. As for the downside, the USD/JPY has multiple uptrend lines serving as technical cushions along with 12/31 and 12/24 lows. Furthermore, the psychological 90 area could serve as a suitable cushion should it be tested.

Present Price: 92.83

Resistances: 92.95, 93.14, 93.30, 93.59, 93.85, 94.02

Supports: 92.61, 92.23, 91.95, 91.78, 91.57, 91.37

Psychological: 95, 90, September Highs

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