The USD/JPY has averted a retest of September lows once again, finding bottom on our 1st tier uptrend line. U. S. equities and crude are retreating while the Dollar experiences a broad-based appreciation due to a combination of weak econ data from the U. S. and EU along with more dovish statements from BoE Governor King. Crude has dropped beneath our important 1st tier uptrend line while U. S. Treasuries strengthen.

Global markets have made some bearish movements over the past 24 hours, preceded by a hefty retreat in the Shanghai Composite and Baltic Indexes earlier this week. These factors combined are helping the USD/JPY base while avoiding a collapse beneath September lows and the psychological 90 level. While we maintain our negative outlook on the USD/JPY trend-wise, the aforementioned developments are certainly causing a stir in equity markets. If the broad-based appreciation of the Dollar takes a technical step forward, the USD/JPY may be inclined to follow due to correlation.

Meanwhile, Japan’s Trade Balance data topped analyst expectations as we expected. Unfortunately, Japan also cautioned that the completion of stimulus measures may leave a gaping hole in demand for Japanese exports. Therefore, Japan’s encouraging Trade Balance number comes with a cautionary lining. Investors should continue to pay particularly close attention to Chinese equity markets and economic indicators. A further slowdown in the pace of China’s economic recovery would place extraordinary pressure on Japanese manufacturers and exporters since China has been the engine of the global recovery.

Technically speaking, the continual defense of the highly psychological 90 area is not surprising. The USD/JPY is exhibiting behavior conductive for building a new base. Such a development could be encouraging for the USD/JPY’s near-term performance. However, investors shouldn’t forget the technical collapse of the USD/JPY over the past month and a half. Furthermore, the DPJ’s fiscal policy is rumored to be supportive of a stronger Yen. Hence, the longer-term downtrend of the USD/JPY is still intact until the currency pair overcomes some serious downward pressures. The USD/JPY currently faces technical barriers in the form of our 5 downtrend lines, 9/21 highs, and
9/7 highs. As for the downside, the USD/JPY does have some historical consolidation between 88.50 and 90. Therefore, near-term losses should be limited due to the technical and psychological significance of present levels. As a result, present technicals continue to favor immediate-term gains over losses.

Present Price: 91.12

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