By Fast Brokers – The USD/JPY is trying to stabilize today after its key selloff on July 8th. As we noted before, the USD/JPY darted below our 1st tier uptrend line as it collided with our 1st tier downtrend line, normally a negative statement regarding trend. Though the USD/JPY’s volume shot up from recent levels, the volume registered on July 8th didn’t reach a height you’d expect to see on a key movement. This tells us one of two things, either there is another large confirming near-term selloff approaching, or investors aren’t prepared to test the murky waters of January lows. We still believe July 8th’s downturn was a statement, possibly a warning shot of what’s to come. While we expect the USD/JPY to retest the psychological 90 level at some point, 88-90 should act as a worthy cushion to the downside. Therefore, bulls shouldn’t overly concerned at this point. After all, 2008/2009 lows are very important psychologically and economically, so it would take a huge negative wave to wash away the USD/JPY’s defenses. As for the upside, getting back above our 1st tier trend lines would be an encouraging development and could alter our negative outlook.
Last Tuesday Japan reported discouraging Core Machinery Orders and Current Account data. These data points signal the Japanese economy continues to feel pressure from declining demand for its manufactured goods both at home and abroad. Lower Japanese corporate earnings and higher unemployment are pinching domestic demand. The discouraging Current Account number makes investors worry that international consumption is not picking up as quickly as the improvement in global consumer sentiment data may suggest. An appreciating Yen should only make matters worse, so a declaration of the downtrend by the USD/JPY could be very bad news for Japan.
Investors will be keeping a close watch on U.S. corporate earnings and economic data releases this week. Any significant disappointments on the earnings or data front could result in a sizable pullback in the S&P futures. Considering the USD/JPY is positively correlated with U.S. equities, this could result in the retest of 90 as we mentioned before.
Present Price: 92.31.
Resistances: 92.57, 93.32, 93.76, 94.45, 94.99
Supports: 91.96, 91.50, 91.03, 90.28, 89.86
Psychological: 90, 95
Market Commentary provided by Fast Brokers.
Disclaimer: FastBrokers’ market commentary is provided for information purposes only and under no circumstances should be regardedneither as an investment advice nor as a solicitation or an offer to sell/buy any financial product. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained.
Risk Disclosure: There is a substantial risk of loss in trading futures and foreign exchange. Please carefully review all risk disclosure documents before opening an account as these financial instruments are not appropriate for all investors.
