Overview:
USD/JPY is trading with bearish bias. The rate is undermined by flows to safe-haven JPY and unwinding of JPY-funded carry trades amid increased risk aversion as news of a bank-deposit levy Cyprus must impose in exchange for a EUR10 billion euro bailout from its European partners and IMF hurt investor confidence about deposit insurance guarantees across the euro zone. USD/JPY is also weighed by negative USD sentiment after surprise drop in University of Michigan consumer sentiment index to 71.8 in March, its lowest level since December 2011, from 77.6 in February (vs. forecast for rise to 78), fall in Empire State's business conditions index to 9.24 in March from 10.04 in February (vs. 10.00 forecast); lower U.S. Treasury yields; Japan exporter sales. But USD sentiment soothed by bigger-than-expected 0.7% increase in U.S February industrial production (vs. +0.4% forecast) and higher-than-expected capacity utilization of 79.6% (vs. 79.4% forecast). USD/JPY losses also tempered by demand from Japan importers; expectations of aggressive monetary easing from Bank of Japan to achieve 2% inflation target.
Recommendation:
Buy above 94.57 with in sight of upward targets at 95.4 and 95.65.
Resistance levels:
R1 - 95.4
R2 - 95.65
R3 - 96.28 (Friday's high)
Alternative scenario:
Sell below 94.57 with downside targets at 94.26 and 93.97.
Support levels:
S1 - 94.26
S2 - 93.97
S3 - 93.45 (this morning's low)
Technical comment:
Daily chart is tilting negative as stochastics turned bearish at overbought and MACD is staging bearish crossover against its exponential moving average.
