The USD/JPY's little rally is fading again as volume subsides. It seems the USD/JPY is dribbling to a dead-halt directionally with four consecutive lower highs (4/6, 5/7, 6/5, and now 7/1) combined with two consecutive higher lows (5/22, 6/23).

The currency pair remains stuck choosing between the two deteriorating economies of Japan and the U. S. While worse than expected Tankan data provides upward buoyancy on the USD/JPY, negative unemployment data and falling U. S. equities create a downward pressure on price.

Hence, we see a tight, constrictive trading range in the USD/JPY. The currency pair is following the negative data out of the U. S. and EU today, dipping back towards our 2nd tier downtrend line.

Meanwhile, investors should keep a close watch on the S&P to see how the futures deal with the 875-900 range. If the S&P's bottom-end supports don't hold and a new leg down forms, this movement may be enough to send the USD/JPY falling towards our key 1st tier uptrend line.

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