The USD/JPY is heading south as our 1st tier uptrend line and 2nd tier downtrend lines reach an inflection point despite a better than expected Trade Balance from Japan earlier today. Japan's Trade Balance showed slight improvements in exports, although nothing to pour champagne over.

We feel the Trade Balance data could be a lagging indicator as it may not reflect the present export environment. What we do see is a currency pair succumbing to its negative tendencies, following U. S. equities lower.

The strong positive correlation between the two is returning to the fray as the highly psychological 100 level fades into the distance. The obstacles to the upside are mounting, and the inability for the USD/JPY to capitalize on its advantageous position in March shows the currency pair is not ready to commit to an end in the global financial crisis.

While investor focus may be on the EUR/USD and GBP/USD right now due to the USD/JPY's lack of volatility lately, we encourage traders to keep a close eye on this currency pair.

If the USD/JPY were to decline below our 97.11 support and 1st tier downtrend line, we could see losses accelerate rapidly in the near-term. The performance of the USD/JPY will likely depend on U. S. equities.

If the S&P futures experience further weakness the USD/JPY may be inclined to follow suit. Fundamentally, we find resistances of 98.56, 99.20, 99.79, 100.28, and 100.71.

To the downside, we see supports of 97.59, 97.11, 96.33, and 95.55 with fresh bottom-end of 95.04. The 100 level serves as a key psychological barrier with 95 acting as a psychological cushion. The USD/JPY is currently exchanging at 97.66.

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