As expected, the Yen was one of the main victims of tapering as there is now an even sharper contrastbetween the Fed and an accommodative Bank of Japan. While prices have bounced back from their initial movethrough the 96.00 level this morning, the market still remains in close proximity to yesterday afternoon’s multi-yearlow. Expectations for a much lower Yen valuation have made the short side of the Yen a very crowded space,particularly with month-end and year-end on the market’s horizon. With the Bank of Japan having their say onpolicy matters tonight, there is potential for a decent short-covering recovery if today’s US data fails to meetmarket expectations. The March Yen could climb up towards the 96.52 level later today, with any move uptowards the 97.00 level and beyond seen as a fresh opportunity to enter the short side of the market.
Technical Outlook: The market was pushed to a new contract low. A bearish signal wastriggered on a crossover down in the daily stochastics. Daily stochastics declining into oversold territory suggestthe selling may be drying up soon. The market’s close below the 9-day moving average is an indication the shorttermtrend remains negative. The outside day down is a negative signal. The defensive setup, with the closeunder the 2nd swing support, could cause some early weakness. The next downside target is 94.57. Somecaution in pressing the downside is warranted with the RSI under 30. The next area of resistance is around 96.99and 98.42, while 1st support hits today at 95.07 and below there at 94.57.