Now that the Yen has partially corrected the technically oversold condition from the late July washout and there have been some signs of slowing in the Chinese service sector, we suspect that flight to quality interestmight be able to provide a temporary cushion to the Yen. However, from a position perspective we can’t rule outan eventual return to the 96.00 level as the progression of recovery in the Japanese economy becomes moreapparent. Traders might look to short the September Yen this week on a rally back above the 98.00 level.
Technical Outlook: Daily stochastics are trending lower but have declined into oversold territory.The close below the 9-day moving average is a negative short-term indicator for trend. The outside day up issomewhat positive. Since the close was above the 2nd swing resistance number, the market’s posture is bullishand could see more upside follow-through early in the session. The next downside target is 96.80. The next areaof resistance is around 97.85 and 98.13, while 1st support hits today at 97.19 and below there at 96.80.