The USD/JPY exercised its positive correlation with U. S. equities yesterday, popping nicely back above the psychological 95.00 level while avoiding our 1st tier uptrend line. However, the currency pair is backing away from our 1st tier downtrend line as yesterday's volume failed to impress. Meanwhile, the USD/JPY remains lodged in its downtrend line while not participating in the recent surge of U. S. equities like the EUR/USD and GBP/USD.

Therefore, the USD/JPY is sending a message of continual relative weakness in the Japanese economy despite improvement in Core Machinery Orders, a forward looking economic indicator. Investors will get a clearer picture later in Wednesday's session with Japan announcing Prelim GDP. Analysts are anticipating further deterioration in Japan's GDP, and a surprise in either direction could certainly be a market mover as far as the USD/JPY is concerned.

We maintain our bearish outlook trend-wise on the USD/JPY due to the downward inclination of the currency pair technically and fundamentally. The USD/JPY has failed to destroy the psychological 100 level on several attempts while dropping below all of our downtrend lines.

The USD/JPY is at the bottom of its right shoulder, meaning a critical juncture for the currency pair could be approaching with key economic data on the way. March 18 lows and our 1st tier uptrend line are keys fundamentally. If these don't hold then we could witness accelerated losses. On a positive note, our 1st tier uptrend line is intact with another possible uptrend line should this one be broken.

Therefore, if today's Prelim GDP should come in better than expected and the S&P rally strongly above 900, we could see a fundamental turnaround in the USD/JPY. However, the same difficult fundamental obstacles remain to the upside should any encouraging upswing occur, limiting near-term gains.

Fundamentally, we find resistances of 96.33, 97.32, 97.98, 98.67, and 99.20. To the downside, we see supports of 95.58, 95.12, 94.50, 93.66, and 92.71. The 100 level serves as a key psychological barrier with 95 acting as a psychological cushion. The USD/JPY is currently exchanging at 96.10.

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