The USD/JPY is reversing from 98 and our 4th tier downtrend line after Friday’s encouraging rise. The currency pair is now bouncing between our 4th tier downtrend line and 2nd tier uptrend line as they approach their inflection point. Today’s appreciation of the Yen comes with much better than expected Core Machinery Orders and Current Account data points from Japan.

Investors are favoring the Yen and the Japanese economy in reaction, particularly after economist Paul Krugman cautioned that the U. S. economic recovery has a long road ahead. The improvement in Japan’s economic data is certainly encouraging, especially the sizable rise in the nation’s Current Account balance. The pickup in Japan’s Current Account balance is likely due to the economic recovery taking place in China. Therefore, better than expected economic data from China tomorrow could add further near-term downward pressure since this news would favor Japan’s economy.

Despite today’s pullback, the USD/JPY made encouraging headway on Friday. The currency pair finally woke from its hibernation, heading back into contention for 100. However, the USD/JPY faces new immediate-term foes, including our 4th tier downtrend line and Jen highs. Regardless, the USD/JPY is in an opportunistic position to extend its near-term breakout. Furthermore, any eclipse of our 5th tier downtrend line could signal a longer uptrend line with a retest of 100 likely. On the other hand, should our 2nd tier uptrend give way, the USD/JPY’s immediate-term pullback could pick up speed towards the 96.42-96.74 zone.

Present Price: 97.30

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