The USD/JPY continues to fill out its right shoulder on discouraging volume. The fact volume hasn’t picked up is limiting the ability of the USD/JPY to propel through the top of its right shoulder towards 100. Meanwhile, the currency pair is struggling to stay above our 2nd tier uptrend line as it reaches an inflection point with our 2nd tier downtrend line.
The USD/JPY still isn’t participating in the broad equity rally, serving as the cautionary flag among economic recovery optimists. Normally positively correlated, the fact the USD/JPY hasn’t followed suit is disconcerting. However, we recognize the significance of 100, and putting this level in the rear-view mirror would symbolize full investor confidence in a broad, global economic recovery. Due to the mixed performance of the USD/JPY, we have a neutral stance.
Japan has a couple news events this week, including BOJ Governor Shirakawa addressing the public on Wednesday followed by Core Machinery Orders on Thursday. Core Machinery Orders showed significant improvement with a surprise to the upside last month, so it will be interesting to see if the data point can continue to show improvement. Since Core Machinery Orders are forward-looking and indicative of the outlook of Japanese exporters and manufacturers, this release could be a market-mover.
Fundamentally, we maintain resistances of 99.20, 99.79, 100.56, and 101.43 with fresh top-end hanging at 102.14. To the downside, we see supports of 98.67, 97.98, 97.32, 96.33, and 95.58. The 100 level serves as a key psychological barrier with 95 acting as a psychological cushion. The USD/JPY is currently exchanging at 99.13.
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