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Dollar/yen  repeated its ritual of temporarily moving higher but this time it managed to close above one resistance level Is it starting to move?  All Industries Activity is the main event this week. Here’s an  outlook  for the Japanese events and an updated technical analysis for  USD/JPY.

Last week Japanese core machinery orders, increased dramatically by 11.0%, well beyond the 4.7% rise estimated by analysts indicating future expansion in production activity bringing optimism to the economy.

USD/JPY  daily chart with support and resistance lines on it. Click to enlarge:

USD/JPY Chart October 17 21 2011

  1. Revised Industrial Production  : Monday, 4:30. Japanese industrial production increased by a revised 0.4% in July after 0.6% gain in the previous month. The increase was led by expansion in industrial production. The same increase of 0.8% is expected now.
  2. All Industries Activity: Wednesday, 4:30. Japanese all industry activity climbed for a fourth consecutive month in July gaining 0.4% after 2.2% rise in June.   On a yearly base all industry activity dropped 0.8% in July. A decrease of -0.2% is forecasted.

*All times are GMT

USD/JPY  Technical Analysis

Dollar/yen was asleep in the first half of the week. It then moved higher and challenged 77.50, a new line that didn’t appear last week. For a change, it even closed higher.

Technical lines from top to bottom

79.30 proved to be a stubborn cap for dollar/yen, holding down recovery attempts. At these tight ranges, it remains far at the moment. Another downwards leg was seen after an attempt to break higher.  78.50 provided some support before another drop, and is now a weak line of resistance.

77.85 was tough resistance when the pair made an attempt to make an upwards move higher in September. 77.50 is a new minor line on the chart, after being challenged twice recently.

The round number of    77, remains a significant cap for the range trading that characterizes the pair even though it was temporarily breached.  Further below we have the swing record low of 76.25 which is still of some importance.

The low record of 75.95 is the final frontier in charted territory.  Below, the round number of 75 is the next potential cushion and an area where the Japanese authorities will be keen to intervene.

I am neutral on USD/JPY.

While the pair finally closed above 77 and has room for gains in the long run, it is hard to see the pair making a serious move right now. The high level of optimism probably won’t be repeated right now.

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