By Fast Brokers – The USD/JPY is dropping like a rock today in a delayed response to the recent return to the risk trade we mentioned in yesterday’s commentary. After printing strong Trade Balance data, China announced its second measure this week to tighten liquidity by increasing its rate of required reserves by 50 basis points. China’s effort to curtail its economic growth tells us its economy may be speeding ahead faster than anticipated, a positive sign in regards to Japan and developing nations as a whole. However, China’s more hawkish approach monetarily could curtail global growth in the medium-term should China up its measures over time. Meanwhile, Japan Airlines tumbled 45% during the Asia trading session after it became clear the company would have to file for bankruptcy. Japan Airline’s pending bankruptcy could be a driving force behind a stronger Yen, though this seems counterintuitive. That being said, investors should keep an eye on broad based activity in the Dollar since today’s pullback in the USD/JPY could be foreboding of a pop in the EUR/USD and Cable. Investors are anticipating tomorrow’s Core Machinery Orders data along with the release of the Fed’s Beige Book. However, focus remains primarily on Thursday’s U.S. Retail Sales data since a recovery in U.S. consumption bodes well for Japanese manufacturers and exporters.
Technically speaking, the USD/JPY’s has sunk beneath previous our 4th tier uptrend line and previous January lows, a negative development trend-wise. The next test will be our 3rd tier uptrend line and 12/24 lows. Should these cushions give way the USD/JPY’s downward momentum could accelerate towards the highly psychological 90 trading range. As for the topside, the USD/JPY faces multiple downtrend lines along with 1/06, 1/04, and 1/08 highs.
Present Price: 91.13
Resistances: 91.22, 91.45, 91.61, 91.88, 92.13, 92.30
Supports: 90.96, 90.80, 90.54, 90.24, 90.05, 89.90
Psychological: 95, 90, January highs
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