By Fast Brokers – The USD/JPY has tumbled below 90 as July’s upper house elections come into focus. The most heated debate is surrounding a proposed increase in Japan’s consumption tax. The consumption tax conversation represents a Japanese government which is becoming more hawkish by the day. Ratings agencies are putting Japan’s feet over the fire while threatening to cut their debt ratings should the government not enact a sufficient plan for reducing the nation’s debt-load. Naoto Kan has been leading the charge, stating that Japan’s books will be balanced by 2020. Overall, Japan is becoming more conservative fiscally, resulting in a stronger Yen. Meanwhile, the Fed gave a darker outlook for the U.S. economy yesterday, reinforcing the central bank’s loose monetary policy for an extended period of time. With Japan becoming more hawkish and the Fed staying dovish, the Yen has more than enough incentive to appreciate against the Dollar this week. However, we’ve seen how influential 90 can be on the USD/JPY, so it wouldn’t be surprising to see the currency pair enter another one of its consolidation phases again shortly. Attention will shift to the U.S. with weekly unemployment claims and core durable goods data on the way. It will be interesting to see whether the USD/JPY can manage to hold above 5/20 lows or whether this downward movement swings towards 5/6 lows.
Technically speaking, the USD/JPY faces multiple downtrend lines along with intraday and 6/23 highs. The psychological 90 level now becomes a psychological barrier. As for the downside, the USD/JPY has technical supports in the form of 5/20 and 5/6 lows.
Present Price: 89.31
Resistances: 89.35, 89.55, 89.67, 89.94, 90.12, 90.22
Supports: 89.10, 88.80, 88.53, 88.12, 87.84
Psychological: .90, June highs and May lows
(click chart to enlarge)
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