By Fast Brokers – The USD/JPY has undergone a sizable pullback after consolidating the past few sessions. America’s weaker than expected GDP data is leading investors to prefer the Yen over the Dollar as a safe haven, thereby sending the USD/JPY tumbling towards October lows. Meanwhile Finance Minister Fujii reiterated his concern surrounding the impact of deflationary pressures on Japan’s economy. However, the BoJ does have autonomous power, and it remains to be seen whether Fujii carries enough clout to persuade the central bank to add more liquidity measures to the system. Meanwhile, investors should actively monitor the USD/JPY’s interaction with our 1st tier uptrend line since it runs through October lows. A retracement below our 1st tier may not only imply a retest of 88, but possibly a wave of more extensive near-term losses. On the other hand, should October lows be tested and give way, the BoJ may be inclined to buoy the USD/JPY through the use of psychological and/or fundamental monetary forces.
Japan will enter the data wires again tonight EST with the release of its Trade Balance. Japan’s Trade Balance data was disappointing in its previous release, so it will be interesting to see whether Japan maintains a trade surplus this time around. A dip back into a trade deficit would likely imply weak demand from the West since China’s econ data continues to outperform. In addition to Japan’s Trade Balance data, the U.S. will release Durable Goods Orders, New Homes Sales, and Unemployment Claims tomorrow. The DGO and Unemployment Claims releases could have a moderate impact on the USD/JPY since the numbers give investors a better idea of the current state of U.S. consumption, and consequently demand for Japanese goods.
Technically speaking, the USD/JPY has our 1st tier uptrend line and October lows serving as technical cushions. As for the topside, the currency pair faces multiple downtrend lines along with 11/23 and 11/18 highs. Additionally, the USD/JPY must deal with its psychological 90 level and longer-term downtrend pressures before mounting a credible comeback. Hence, many topside obstacles remain.
Present Price: 88.43
Resistances: 88.46, 88.61, 88.85, 89.06, 89.17, 89.42
Supports: 88.30, 88.18, 88.01, 87.86, 87.66
Psychological: 90 and October Lows
Market Commentary provided by Fast Brokers.
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