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The Japanese economy slipped into recession in the three month through September as April's sales tax hike appeared to have a more prolonged and devastating impact than expected on consumer spending and business investment. However, analysts forecast the economy to return to growth in the final quarter of 2014, but concerns about the strength of the recovery of the world's third biggest economy persist. As a result, the Moody's rating agency cut Japan's sovereign rating by one notch as it doubts Prime Minister Shinzo Abe's economic, fiscal and monetary reforms will help to revive the nation's economy and achieve fiscal deficit reduction goals.
Also US ISM manufacturing PMI was released and that is considered a more important driver of the pair and the market in general. The US manufacturing sector growth slowed in November to its lowest rate since January, while indicators of new orders and output also declined to their lowest levels since the beginning of the year. Markit said its final US Manufacturing PMI gauge fell to 54.8 from October's final reading of 55.9.
Relatively tranquil trading day anticipated
After the manufacturing data released from both countries, Tuesday is going to pass without important data releases in the regions. Therefore, we welcome you to pay bigger attention to our technical analysis that will describe the situation more closely.{ATTACHMENT}
USD/JPY continues to trade around this year's highs
At the first half of the year USD/JPY was trading almost completely flat, as it traded around the 102 level. However, at the second part of August the Greenback started to outperform the Japanese peer rather heavily. Currently, the pair has reached the 118/119 mark and for the time being it is supported by the support line and weekly PP around the 118 mark, if this level holds then we might see the pair climbing even higher. Nonetheless, in case these levels do not hold the selling pressure then the pair is likely to slide towards the monthly PP at 116.75.Daily chart
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USD/JPY struggled to remain above the 118 level yesterday; however, with a help of the weekly PP and 100/200-period SMAs the US Dollar is still trading above the trend-line. Now the pair is climbing towards another major level at 119 and we think that the pair might be ready to surpass it, even though yesterday it failed to do so. The bullish daily PP will be a helpful hand to leave the 119 level behind.
Hourly chart
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