USD/JPY Weakens On Improvement In Japanese Industrial Production

The USD/JPY’s run is fading quickly, backing away from our 2^nd tier downtrend line while giving into the heavy downward pressures exerted on price.  Present weakness in the USD/JPY comes after a head-turning 5.2% growth in industrial production, giving investors incentive to appreciate the Yen.  Investors seem to be ignoring the decline in consumer prices and spending.  We have seen improvement in machinery orders, exports, and now industrial production.  Therefore, it seems the drivers of growth are recovering, meaning consumer behavior should improve soon as well.

Interestingly, investors are showing preference for the Yen vs. the Dollar, meaning the Japanese economy and balance sheet may be in better shape than America’s.  We notice the broad-based depreciation of the Dollar.

Now that the global economy is stabilizing, the U.S. will have to deal with the ramifications of its extraordinary injection of liquidity.  Unfortunately for Japan, the longer the Yen trades at an elevated valuation against the Dollar, the longer exports to the U.S. will be hampered.

We can tell you that not much has changed fundamentally for the USD/JPY.  Though Thursday’s gains came on rising volume, total volume was nothing to brag about.  The currency pair is declining back towards our 1^st tier downtrend line with 4 more downtrend lines bearing overhead, not to mention the highly psychological 100 level resting well out of reach.  Therefore, we maintain our bearish outlook trend-wise on the USD/JPY.  Bulls have their work cut out for them.  The first key to the uptrend will be holding our 2^nd tier uptrend line.  If this line of defense doesn’t hold, we could see the present pullback pick up speed.

Fundamentally, we find resistances of 96.33, 96.90, 97.45, 97.98, and 98.69.  To the downside, we see supports of 95.82, 95.12, 94.43, 93.77, and 92.65.  The 100 level serves as a key psychological barrier with 95 acting as a psychological cushion.  The USD/JPY is currently exchanging at 95.80.

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