By Fast Brokers
The USD/JPY is rebounding nicely from our 2nd tier uptrend line and critical March 18 lows despite the tensions surrounding North Korea. Additionally, investors are brushing aside a much worse than expected Japanese Trade Balance coupled with a large downward revision in April’s release. Japan’s negative Trade Balance shows global consumption may not be recovering as quickly as investors are pricing in. Furthermore, exports to China could be slowing, indicating China’s economy may not be as strong as thought. An overall appreciated Yen is really taking its toll on demand for Japanese exports. However, before we read too far into the Trade Balance, we can’t forget Core Machinery Orders are rising at an encouraging pace. Therefore, Japan’s forward-looking economic performance is looking up. Japan will release Retail Sales later in Wednesday’s session, giving investors a better idea of the state of the nation’s economy.
Meanwhile, the USD/JPY remains lodged between our 2nd tier uptrend line and 1st tier downtrend lines. The pressure is still clearly applied to the downside with 5 downtrend lines and the critical 100 level bearing overhead. Every recent near-term pop has been accompanied by disappointing volume, showing the bulls lack conviction. The USD/JPY has neglected its positive correlation with U.S. equities as of late, preferring to participate in the broad depreciation of the Dollar. March 18 lows and our 2nd tier uptrend line continue to play a key defensive role. If these cushions don’t hold, we could see the downturn pick up speed towards our 1st tier uptrend line. The line of defense is running thin, meaning the Yen is on the cusp of a rapid appreciation against the Dollar. Therefore, a large near-term pop backed by sizeable volume is sorely needed to keep the weak near-term uptrend alive. We maintain our bearish outlook trend-wise due to the aforementioned reasons.
Fundamentally, we find resistances of 95.88, 96.33, 96.90, 97.32, and 97.98. To the downside, we see supports of 95.12, 94.51, 93.66, 92.75, and 92.07. The 100 level serves as a key psychological barrier with 95 acting as a psychological cushion. The USD/JPY is currently exchanging at 95.26.
Market Commentary provided by Fast Brokers.
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