The September Yen produced a gap-lower opening last night that has turned into a sizable downside breakout, with prices posting heavy losses coming into this morning’s trading. Reports that the Japanese government may propose fresh corporate tax cuts provided rocket fuel to Japanese equities, which posted their strongest daily gains since August 2nd and have deflated the Yen’s safe-haven appeal. With China unlikely to create near-term global growth concerns now that their recent data has been fully digested by the market, there is likely to be more of a safe-haven shift towards the Dollar if upcoming US data can continue avoiding any negative surprises. The Bank of Japan has a long way to go before they let up on their aggressive easing measures and with global risk sentiment on the mend, the Yen looks to have much further downside ahead of it. The September Yen will find support at the 101.84 area early today, and will remain squarely on the defensive this morning even if today’s US Retail Sales numbers ends up disappointing the market.
Technical Outlook
JPY (SEP): Studies are showing positive momentum but are now in overbought territory, so some caution is warranted. The close above the 9-day moving average is a positive short-term indicator for trend. The downside closing price reversal on the daily chart is somewhat negative. The market setup is somewhat negative with the close under the 1st swing support. The next downside objective is 97.32. The next area of resistance is around 98.46 and 98.87, while 1st support hits today at 97.69 and below there at 97.32.