The USD/JPY has recovered nicely along our 2nd tier uptrend line while experiencing declining volume to the downside, both encouraging developments for the uptrend.  However, the currency pair still feels the pressure from its medium-term downtrend, and is being squeezed between our 2nd tier uptrend and downtrend lines.  Meanwhile, the USD/JPY's positive correlations are under selling pressure as it seems U.S. equities could be in for a pullback. 

The Dollar is appreciating across the board, and there is no reason to believe the USD/JPY wouldn't participate.  Investors are heading for safety with uncertainty creeping back into the market place concerning the sustainability of the global economic recovery.

Today's economic data from Japan showed a large improvement in business conditions and outlook.  It seems Japan's economy could finally be finding a bottom with manufacturers and exports adjusting to the concept of a weaker global aggregate demand. 

Coincidentally, the positive numbers from Japan are adding to the downward momentum in the USD/JPY.  The central banks of both the U.S. and Japan have their benchmark rates hovering just above zero while the nations participate in their respective alternative liquidity measures.  Hence, any positive data from Japan combined with negative data from the U.S. results in an appreciation of the Yen against the Dollar.

Regardless, the currency pair is hanging onto our 2nd tier uptrend line, and it will be interesting to see how it react reacts to the inflection point approaching.  If the 2nd tier uptrend line fails, there's quite a ways down to our 1st tier uptrend line.  Investors will be keeping a close eye on the S&P futures and how the futures deal with a retest of 900 should it occur.  We maintain our negative outlook on the USD/JPY trend-wise.       

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