USD/JPY Heads Higher after Improvement in America's HPI

Investors are nibbling on the USD/JPY after America's HPI data came in nine basis points ahead of analyst expectations. The USD/JPY has experienced encouraging support in our 1st tier uptrend and 2nd tier downtrend lines while bulls work to avoid a retest of July lows. It remains to be seen whether the USD/JPY will opt to participate in a broad-based depreciation of the Dollar or choose to recover with U.S. equities. The decision will likely depend on the comparative performance of U.S. and Japanese economic data. Thus far, America's economic data hasn't been faring much better than Japan's. Therefore, the Yen has appreciated against the Dollar despite breakouts in the S&P futures. Speaking of which, the S&P futures are separating themselves from 1000, and it will be interesting to see if the USD/JPY participate to the topside should U.S. equities continue their impressive climb.





Japan will release its Trade Balance during America's evening session, creating the possibility of heightened volatility in the USD/JPY. Japan will also deliver Household Spending and its Tokyo Core CPI data points on Thursday. Investors will be eyeing tonight's Trade Balance data to see whether there is a noticeable improvement in demand for Japan's exports. A larger than expected surplus coupled with an outperformance in exports could help fuel an immediate-term global equity rally. However, it remains to be seen whether stronger Japanese data would have a positive or negative impact on the USD/JPY. While investors would expect the USD/JPY to exhibit a positive correlation with U.S. equities should Japan's data beat expectations, investors could opt to favor the Yen over the Dollar instead. On the other hand, underperformance of Japan's economic data coupled with rising U.S. equities would likely result in a healthy rise in the USD/JPY.





Meanwhile, the USD/JPY faces sizable medium-term downward pressure considering all of our downtrend lines the currency pair faces, not to mention the highly psychological 100 level waiting patiently in the distance. If our 1st tier uptrend line doesn't hold, the USD/JPY could experience another leg down. As for the topside, bulls are hoping to get the USD/JPY back above its psychological 95 level. Regardless, we anticipate heightened near-term volatility with the flood of economic data. Our prediction is reinforced by the inflection points of our 1st tier uptrend and 2nd tier downtrend lines and our 2nd tier uptrend and 3rd tier downtrend lines.