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Dollar/yen  fell once again and returned to the “intervention zone” as the dollar weakened. Will the BOJ make a move?  Trade balance is the major event this week. Here’s an  outlook  for the Japanese events and an updated technical analysis for  USD/JPY.

Last week BSI Manufacturing Index for the third quarter was released ticking up to 10.3 from -23.3 in the second quarter but Revised Industrial Production was downward adjusted to 0.4% from 0.6%. Will recovery take the upper hand on the next few months?

USD/JPY  daily chart with support and resistance lines on it. Click to enlarge:USD JPY Chart  September 19 23 2011

  1. Trade Balance: Tuesday, 23:50. Japan’ trade balance dropped more than predicted in June reaching -0.13T from -0.19T in the previous month while analysts expected it to narrow to -0.12T indicating imports are still high compared to exports expanding the national debt. Another big drop to 0.01T is expected now.
  2. All Industries Activity: Wednesday, 4:30. Japanese all industry activity continued to expand in June gaining 2.3% from 1.8% in May with in expectations. This is the third consecutive rise indicating expansion in the market. On a yearly base, all industry activity climbed for the first time in four months rising 0.2%. A smaller gain of 0.9% is predicted.
  3. IMF Meetings: Friday. The Annual Meetings of the World Bank Group and the International Monetary Fund (IMF) summon together central bankers, ministers of finance and development, private sector executives. The discussions include issues of global concern, including the world economic outlook, poverty eradication, economic development, and aid effectiveness. This year’s meeting will take place inWashingtonD.C. September 23-25, 2011

 *All times are GMT

USD/JPY  Technical Analysis

Dollar/yen fell below the important 77 line (discussed last week) and remained depressed under it. A quick spike higher was very short lived, and the next move upwards also met this line. The pair closed at 76.76.

Technical lines from top to bottom

81.06 was a weak line of support in May and slowed down a second move upwards.  80.50 held the pair several times recently and remains a strong and immediate line of resistance on another attempt to settle above 80.

The round number of 80 is still of importance. It is closely followed by 79.75 – the historic low of 1995 and played a critical role when the pair collapsed in March. It is now a minor line, after being run through.

Below, 79.30 proved to be a persistent cap for dollar/yen, holding down recovery attempts. . An attempt to break higher resulted in another downwards leg.  78.50 provided some support before another drop, and is now a weak line of resistance.

Further down, 78.20 worked as temporary resistance, and has the same role now.  77.85 was tough resistance when the pair moved higher in September.

It is followed by 77, which was a significant cap for the range trading seen for yet another week, despite the short spike.  Further below we have the swing record low of 76.25, which was seen on the  huge collapse in March  and will be closely watched by the authorities.

The low record of 75.95 is the final frontier in charted territory. Below, the round number of 75 is the next potential cushion.

I am bullish on USD/JPY.

At these levels, the BOJ is likely to intervene and push the pair higher, at least temporarily. They reportedly checked trading levels just now. An intervention has higher chances in case of significant easing measures made by the Federal Reserve, although QE3 is quite unlikely. If Bernanke and his colleagues don’t announce anything dramatic, USD/JPY has room for rises without help from the friends at the BOJ.

The BOJ can learn from the Swiss, that apparently got it right this time.

Further reading:

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