By Fast Brokers – The USD/JPY is sinking back towards 90 as investors divest from the risk trade with the EUR/USD tumbling below May lows. Hence, despite problems in Japan’s government, the Yen is flexing its status as a safe haven once again. Hatoyama has hinted that he is considering stepping down as 60% of voters say they want him to resign. Though the possibility of a breakdown in Japan’s government is eroded a bit if the Yen’s value as a safe haven, the USD/JPY’s negative correlation with the risk trade doesn’t seem to be under threat for the time being. However, investors should keep a closer eye on Japan’s news wire for any new developments regarding Hatoyma. Meanwhile, analysts are clamoring over the slowdown in Chinese manufacturing, which could in term deliver a blow to Japan’s shaky manufacturing base. Li Daokui, a member of China’s central bank policy committee, suggested that China’s property bubble could be worse than America’s due to the possibility of social unrest. For further analysis on this topic, you can read my blog post last week ‘Year of the Tiger’ at www.blogs.fastbrokers.com/matthew. In addition to negative developments in China, the EU is being hit by a fresh set of psychological headwinds after the ECB announced it expects EU banks to writedown another $240 billion in losses. European equity markets are under pressure today in wake of the news and U.S. equity futures are in the red as well. Investors are currently waiting on America’s manufacturing PMI figure, and it will be interesting to see whether the USD/JPY can avoid a retest of 90 should the EUR/USD’s downturn accelerate.
Technically speaking, the USD/JPY still faces multiple downtrend lines along with 5/19 and 5/31 highs and psychological 92 level. As for the downside, the USD/JPY has technical supports in the form of multiple uptrend lines along with 5/26 lows. Additionally, the highly psychological 90 level should serve as a solid technical support should it be tested.
Present Price: 90.75
Resistances: 90.77, 90.88., 91.03, 91.26, 91.50, 91.67
Supports: 90.64, 90.55, 90.35, 90.20, 90.11, 89.99, 89.79
Psychological: .90, .92, May lows
(click chart to enlarge)
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