By Fast Brokers – The USD/JPY is sinking from Friday’s highs despite calls from Prime Minister Hatoyama and Finance Minister Kan for the BoJ to do what is necessary to fight deflationary pressures. However, the BoJ seems to be doing what it can to avoid more bond purchases in order to restore investor confidence in Japan’s economy. After all, the BoJ wants to do what it can to avoid speculation that Japan will fall into another lost decade. The USD/JPY’s current decline shows that investors may not be giving much weight to comments from Hatoyama and Kan. For if investors thought the BoJ would be proactive in fighting deflationary pressures, the USD/JPY would likely rise in preparation from a looser monetary policy from the BoJ. On the other hand, this may just be a healthy dip in the USD/JPY after last week’s solid rally resulting from a broad-based exit from the risk trade. Meanwhile, the FX market is cooling altogether due to the lack of news and data. However, activity could pick up tomorrow due to key economic releases from the EU and U.S. Additionally, it will be interesting to see how intent the BoJ is in battling deflation when tomorrow’s monetary meeting minutes are released. Meanwhile, investors should monitor the USD/JPY’s ability to stay above our uptrend lines and avoid a retest of the highly psychological 90 level.
Technically speaking, the USD/JPY has multiple downtrend lines serving as technical barriers along with intraday and 2/19 highs. Our 3rd tier downtrend line serves as a key barrier since it runs through January highs. Hence, an eclipse of our 3rd tier could signal a continuation in the rally towards the 93 area. As for the downside, the USD/JPY has multiple uptrend lines serving as technical cushions along with intraday and 2/18 lows. Furthermore, the highly psychological 90 level becomes a technical cushion should it be retested. That being said, the longer the USD/JPY holds above 90 the strong the currency pair’s uptrend becomes due to the level’s psychological relevance in the past.
Present Price: 91.32
Resistances: 91.45, 91.56, 91.70, 91.82, 91.93, 92.07
Supports: 91.28, 91.17, 91.06, 90.97, 90.88, 90.77
Psychological: 90, February highs
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