Overview:
USD/JPY is in range-trade. The rate is underpinned by yen-funded carry trades amid improved investor risk sentiment (VIX fear gauge tumbled 19.17% to 13.96; S&P rose 1.43% overnight) on higher-than-expected 7.0% increase in U.S. housing starts (vs. +1.7% forecast) to five-year high of 1.04 million in March, bigger-than-expected 0.4% rise in U.S. March industrial production (vs. +0.2% forecast). USD/JPY is also supported by demand from Japan importers and investment trusts; Bank of Japan's aggressive easing measures to help reach its 2% inflation target in two years. But USD/JPY gains tempered by Japan exporter sales; weaker USD sentiment on bigger-than-expected 0.2% drop in U.S. March CPI (vs. minus 0.1% forecast), giving Federal Reserve plenty of room to continue its easy-money policies. Daily chart is mixed as stochastics is falling from overbought, positive MACD histogram bars is contracting; but bullish-piercing candlestick pattern was completed on Tuesday.
Recommendation:
Buy above 97.5 with upside targets at 98.4 and 98.71.
Resistance levels:
R1 - 98.45
R2 - 98.71 (Monday's high)
R3 - 99.80 (Friday's high)
Alternative scenario:
Sell below 97.5 with downside targets at 97.1 and 96.5.
Support levels:
S1 - 97
S2 - 96.55
S3 - 96.15
