USD/JPY Fluctuates Around 90

Friday’s rally lost steam as the USD/JPY was deflected from our 2nd tier uptrend line. The USD/JPY neglected to retest the highly psychological 90 level again despite another broad-based wave of Dollar strength in reaction to positive U.S. consumption data. However, the USD/JPY is still trading well above 12/9 lows, indicating the currency pair may be awaiting a signal from other major Dollar pairs. That being said, both the EUR/USD and GBP/USD are currently testing the patience of some key uptrend lines, meaning another leg down in these currency pairs could be in the making. However, it remains to be seen how the USD/JPY would react to such a movement since the USD/JPY’s behavior depends on whether a pullback stems from risk-aversion or broad Dollar strength. Hence, investors may want to keep an eye on tomorrow’s key econ data releases, highlighted by U.S. PPI, Industrial Production, and TIC Long-Term Purchases. Should tomorrow’s set of U.S. data outperform again, we could experience another leg up in the Dollar, a positive development for the USD/JPY. Meanwhile, Japan released economic data of its own. Japan’s Tankan Manufacturing Index printed stronger than analyst expectations, resulting in a slight Yen bounce during the Asia trading session.

Technically speaking, the USD/JPY is presently locked between our 2nd tier downtrend and 3rd tier uptrend lines, a supportive environment for further intraday consolidation. As for the topside, the currency pair faces multiple downtrend lines along with the highly psychological 90 area 12/11 highs and 12/7 highs. As for the downside, the USD/JPY has built a comfort zone between present price and our uptrend lines. Additionally, the USD/JPY has 11/23, 12/8, and 12/9 lows serving as technical cushions.

Present Price: 88.50

Resistances: 89.60, 88.77, 88.97, 89.14, 89.41, 89.66

Supports: 88.34, 88.15, 87.89, 87.70, 87.56, 87.35

Psychological: 90, December Highs and Lows

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