Overview:
USD/JPY is consolidating after hitting near-four-year high of 99.67 on Tuesday. The rate is undermined by profit-taking on yen-shorts; weaker USD sentiment amid expectations that Federal Reserve is unlikely to pare back its quantitative easing program anytime soon after recent comments from Fed Chairman Bernanke and recent disappointing U.S. economic data; Japan exporter sales. But USD/JPY losses limited by aggressive quantitative easing plans from Bank of Japan; yen-funded carry trades amid positive risk appetite (VIX fear gauge ease 2.65% to 12.84; S&P rose 0.35% overnight) as investors remain confident about continued accommodative monetary policies from major central banks-this as China CPI rose less-than-expected 2.1% on-year in March; demand from Japan importers, life insurers and investment trusts. Yen crosses vulnerable to China March trade balance data. Daily chart is still positive-biased as MACD and stochastics are bullish; five-day moving average is above 15-day MA and rising.
Recommendation:
Buy above 98.66 with upside targets at 99.67 and 100 in extension.
Resistance levels:
R1 - 99.67-99.72 (Tuesday's high-May 7, 2009 reaction high)
R2 - 100
R3 - 100.25
Alternative scenario:
Sell below 98.66 with downside targets at 98.09 and 97.74.
Support levels:
S1 - 98.09
S2 - 97.74 (Monday's low)
S3 - 97.2
