The USD/JPY has finally decided to venture below our critical 1st tier uptrend line, which we view as an important development for the currency pair.  Though the USD/JPY hasn't registered the corresponding large volume on the pullback that bears would like to see, this could be the mark of a turning point.

The USD/JPY is trading just above 3/19 lows at present.  Should the pullback pick move beneath these lows on rising volume, we could see a sharp immediate-term selloff towards the 92 level.  The USD/JPY has been in a drawn out battle between the bulls in the bears, so today's movement could mark a significant turning point.  Such a movement could signal the beginning of a new downtrend, which would place further strain on a beleaguered Japanese economy.

Japan reported discouraging Core Machinery Orders and Current Account data yesterday.  These data points signal the Japanese economy continues to feel pressure from declining demand for its manufactured goods both at home and abroad.

Lower Japanese corporate earnings and higher unemployment are pinching domestic demand.  The discouraging Current Account number makes investors worry that international consumption is not picking up as quickly as the improvement in global consumer sentiment data may suggest.  An appreciating Yen should only make matters worse, so a declaration of the downtrend by the USD/JPY could be very bad news for Japan.

Meanwhile, the U.S. earnings season is kicking off with Alcoa, and the S&P futures are beginning the week on a downbeat.  A commitment by the S&P to its downtrend would likely spell more trouble for a pressured USD/JPY since they are positive correlated.  Hence, investors will be keeping a close eye on how earnings fare over the coming two weeks.   

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