The December Yen remains the safe-haven destination of choice for now, but Japanese domestic issues are starting to have a corrosive effect on the market this morning. The tradeoff of corporate tax cuts to offset a sales tax hike has gained traction with the market and has kept Japanese equities near 2-month highs coming out of their holiday weekend, while the Bank of Japan has given few indications that they will be letting up on their aggressive easing measures anytime soon. If global markets can regain a “risk on” attitude after the turbulence of the past week, it will be difficult for the Yen to hold onto this comparative strength versus the Dollar and other major currencies. The December Yen would benefit from any disappointment with US data later today and may retest the 101.40 overnight highs, but a shift in focus back towards the Japanese economy could signal the start of a fresh downside leg.
Technical Outlook
JPY (SEP): The cross over and close above the 60-day moving average indicates the longer-term trend has turned up. The moving average crossover up (9 above 18) indicates a possible developing short-term uptrend. Momentum studies are trending higher from mid-range, which should support a move higher if resistance levels are penetrated. The cross over and close above the 18-day moving average is an indication the intermediate-term trend has turned positive. There could be more upside follow through since the market closed above the 2nd swing resistance. The next upside objective is 101.89. The next area of resistance is around 101.63 and 101.89, while 1st support hits today at 100.91 and below there at 100.44.