The U.S. Dollar has been trading in a well defined upward sloping pattern against the Japanese Yen for the last three months. Furthermore a horizontal level of support-turned-resistance confined the pair below the 98.50-100 mark for quite sometime. The green circles identify levels of support while the red ones identify points at which the horizontal level acted as resistance.
We are now approaching a point at which our horizontal level and upward trending support will intersect. At this level, at about 98.50, the pair may continue to rally upwards.
Fundamentals show a strong case of Yen weakness against the Dollar. One of the greatest pieces of evidence strengthening such a position, is the fact that Japan’s suffered from deflation in February. Indeed, prices fell by 0.1% in the month after having remained flat in January. The continued weakness in the ability of prices to continue a stable upward bias is generally regarded as a sign of underlying weakness in the economy. Additionally, sales figures pummeled in the latest month of available data. February sales fell in the 12 months through February with surveys expecting it to fall by only 3.0%.
