The USD/JPY has received considerable support at the highly psychological 90 level over the past 48 hours. The DPJ decided to suspend elements of its $164 billion stimulus package today. The government is dead-set on cutting wasteful spending and reducing Japan’s debt burden. While this should lead to a stronger Yen over time, the DPJ’s action is helping the USD/JPY hold steady above 90.

Investors believe cutting back on stimulus funding may stymie Japan’s present economic stabilization. Therefore, investors are favoring the U. S. economy over Japan’s today. However, the movement is more of a consolidative pattern and shouldn’t change the USD/JPY’s medium-term downward course regardless of near-term gains. Furthermore, investors should consider the psychological weight of 90. The USD/JPY will not sacrifice 90 easily, and the currency pair will likely need a strong catalyst to drive it below this psychological cushion.

Meanwhile, we’ve readjusted our trend lines to compensate for the USD/JPY’s recent downturn. The currency pair faces four solid downtrend lines to the topside along with
9/9 and 9/7 highs. As for the downside, the USD/JPY has our 1st and 2nd tier uptrend lines along with Wednesday lows and the highly psychological 90 level serving as cushions. Though we have a slightly optimistic outlook on the USD/JPY for the immediate-term, we maintain a negative outlook on the currency pair over the near and medium-term. Japan will have a banking holiday Monday and Tuesday of next week, supportive of our consolidative outlook for the immediate-term. 

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