While the Yen is taking a beating on the charts one should not view that action as a sign of trouble for the Japanese economy. In fact, sharply lower oil prices, a growing currency exchange trade advantage and aggressive stimulus from China paints the best economic picture for Japan in perhaps 10 years. In our opinion, markets work and seeing the Yen ultimately fall below 80.00 could give the Japanese manufacturing sector a magic bullet. However, for the Japanese economy to benefit from increased exports, probably requires a shift away from broad based global deflation fears to positive growth views. Sell 30-40 point rallies.
Technical Outlook: The sell-off took the market to a new contract low. Momentum studies are declining, but have fallen to oversold levels. The market’s close below the 9-day moving average is an indication the short-term trend remains negative. It is a slightly negative indicator that the close was under the swing pivot. The next downside target is 83.07. Selling may soon dry up since the RSI is under 20 indicating the market is extremely oversold. The next area of resistance is around 83.75 and 84.12, while 1st support hits today at 83.23 and below there at 83.07.