The USD/JPY’s deterioration has continued well past its psychological 95 level and our important 1st tier uptrend line. Investors have been favoring the Yen over the Dollar amid warnings from investor heavyweights Buffet and El-Erian that the Dollar could be under severe selling pressure over the long-term if the government doesn’t tighten liquidity appropriately. Such news coupled with disappointing U. S. employment data and large pullbacks in the Shanghai Composite Index (SCI) have led investors to buy up the Yen. The USD/JPY’s recent downturn seems to be more exaggerated than what we’ve witnessed in both the Cable and the EUR/USD.

The collapse of the USD/JPY’s 1st tier uptrend line is a bit disconcerting, and we have little reason to be positive trend-wise right now. However, the currency pair has fought to stay above March lows and our 2nd tier downtrend line. Furthermore, if the USD/JPY’s immediate-term technical do turn sour, July lows are hanging around as a last resort. The USD/JPY’s near-term challenge will be to recover to its psychological 95 level so the currency pair can take another short at our 1st tier uptrend line. Our
1st tier uptrend line is gradually approaching its inflection point with our 3rd tier downtrend line, meaning volatility could pick up in the beginning of next week.

Present Price: 94.70

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