USD/JPY Buckles on Climbing Volume after Mixed U.S. Eco. Data

By Fast Brokers – The USD/JPY is back below 95 and our 1st tier uptrend line as it reaches an inflection point with our 2nd tier downtrend line.  Volume is sizable, showing investors are backing today’s decline.  The combination of weaker than expected Japanese Industrial Production and Household Spending coupled with mixed U.S. GDP data regarding consumption is proving too much for the USD/JPY’s uptrend to handle.  The mixed consumption data from the U.S. GDP number is taking some of the luster away from the optimism surrounding America’s economic recovery.  As we explained before, the uptrend in the USD/JPY is presently reliant on a comparatively stronger U.S. economy vs. Japanese economy.  Since both central banks lowered their benchmark rates close to zero while initiating QE and alternative liquidity policies, the valuation of the USD/JPY is heavily influenced by comparative economic performance of the two nations.  An appreciating Yen only inflicts more damage on fragile Japanese exporters since higher prices of Japanese products could discourage foreign consumers.

Meanwhile, the S&P futures are staring up at their highly psychological 1000 level.  The 1000 mark should prove to be a tough obstacle, meaning the S&P could have limited near-term mobility to the upside.  This could cap gains in the USD/JPY since the currency pair is positively correlated with U.S. equities.  Technically speaking, it would be an encouraging sign if the USD/JPY could fight back above our 1st tier uptrend line as it collides with our 2nd tier downtrend line.  The currency pair will need to deal with the psychological 95 level again while our 3rd tier downtrend line gradually approaches.  As for the downside, the USD/JPY has 7/29 and 7/23 lows to fall back on should the situation deteriorate.

Present Price: 94.62

Resistances: 94.99, 95.73, 96.33, 96.77, 97.20

Supports:  94.49, 93.82, 93.28, 92.90, 92.39

Psychological: 95

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