By Fast Brokers – The USD/JPY finally found some support right above the highly psychological 90 level after collapsing beneath our 1st tier downtrend line. The defense of 90 is to be expected, and the psychological weight of the area should be felt for some time. The USD/JPY has been a key mover the past couple weeks following an extended period of consolidation. Last week investors were favoring the Yen across the board despite Core Machinery Orders coming in much worse than analysts anticipated coupled with a weak GDP number. These two data points would normally have helped buoy the Yen since investors would feel more comfortable with the U.S. economy vs. Japan’s. However, there appears to be a strong psychological force at work that is making investors disregard present data. Investors should recall the selloff in the USD/JPY was triggered by the DPJ’s victory. Hence, there seems to be speculation that the DPJ’s economic policies will favor a stronger Yen instead of liquidating to keep the currency depreciated to aid exporters. This would be a huge shift in economic policy and send shockwaves throughout the major Yen crosses. On the other hand, investors shouldn’t get too far ahead of themselves since the DPJ has yet to make a significant economic policy decision.
Regardless of fundamental truths, the USD/JPY has made its directional decision clear. Our 1st tier uptrend line is fading into the distance, and even our 1st tier downtrend line is losing sight of present price. Therefore, even if the USD/JPY should continue to stabilize, we view the strength as a direct result of oversold conditions. We’ve witnessed fundamental breakouts in both the EUR/USD and gold, showing investors are divesting from the Dollar. The Yen should benefit from such a fundamental divergence from the Dollar, much to the USD/JPY’s chagrin. Meanwhile, the psychological 90 level should play a key psychological role. The USD/JPY also has the trading ranges established during December 2008 and January 2009 lows. Therefore, the USD/JPY seems to be running out of room to the downside for the time being despite the prevalence of the downtrend.
The BOJ will make its first monetary policy decision following the shift in Japan’s governmental power. Hence, eyes will be glued to the headlines late Wednesday as investors look for a change in policy from the previous administration. However, we believe the BOJ will keep its monetary policy intact since the shift is governance is so fresh.
Present Price: 90.73
Resistances: 90.77, 90.96, 91.18, 91.43, 91.72
Supports: 90.55, 90.33, 90.11, 89.75, 89.42
Psychological: 90
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.
