USD/JPY Climbs Amid Political Discontent

By Fast Brokers – The USD/JPY is continuing its positive performance from May lows as the currency pair creates some topside separation from its highly psychological .90 level.  The USD/JPY’s run from May lows has been impressive and a new bottom appears to be in place.  However, investors should keep in mind that the Yen’s safe haven status could come back into play should investor uncertainty escalate once again.  Meanwhile, the USD/JPY is deriving today’s strength from news that Japan’s social democrat party is stepping down.  Hatoyama’s approval rating is now below 20% and nearly 60% of Japanese voters think he should resign.  Discontent over Hatoyama’s unwillingness to shut down America’s military base has eroded confidence in his leadership.  Hence, investors believe July’s upper house election may result in a coalition government and reduce Japan’s ability to counter global economic headwinds.  This has reduced near-term appetite for the Yen.  However, as we said before, the Yen has not lost its status as a safe haven during time of uncertainty, meaning investors should keep a wary eye on new developments in the EU.  Japan’s industrial production release came in below analyst expectations today, though average cash earnings exceeded estimates.  Hence, it’s a mixed bag for Japanese fundamentals.  Tomorrow’s Asia trading session should be active with Chinese manufacturing PMI on deck along with key releases from Australia followed by an RBA rate decision.  Therefore, it will be interesting to see how risk tolerance fares over the next 24-48 hours.

Technically speaking, the USD/JPY still faces multiple downtrend lines along with 2/19 highs and psychological 92 level.  As for the downside, the USD/JPY has technical supports in the form of multiple uptrend lines along with 5/28 and 5/26 lows.  Additionally, the highly psychological 90 level should serve as a solid technical support should it be tested.

Present Price: 91.49
Resistances: 91.50, 91.67, 91.79., 91.94, 92.11, 92.25
Supports:  91.26, 91.03, 90.88, 90.77, 90.64, 90.55, 90.35
Psychological:  .90, .92, May lows

(click chart to enlarge)

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