Overview:
USD/JPY is trading with bearish bias. It is weighed by negative dollar sentiment (ICE spot dollar index hit the eight-month low of 79.864 overnight; last at 80.18 versus 80.25 early Tuesday) and diminished risk appetite (although S&P closed up 0.8% overnight) as worries mount that the partial shutdown of the U.S. federal government, showing little sign of ending quickly, could become a larger drag on the country's economy; and the standoff in Washington might not be resolved by the Oct. 17 deadline to raise the $16.7 trillion U.S. debt ceiling, which would trigger a technical default on U.S. debt obligations. USD/JPY is also undermined by lower U.S. Treasury yields, Japan exporter sales. But dollar sentiment soothed after surprise rise in U.S. ISM manufacturing PMI to 56.2 in September - the highest reading since April 2011 - from 55.7 in August (versus forecast for fall to 55.0). USD/JPY losses are tempered by demand from Japan importers. Daily chart is negative-biased as MACD and stochastics are bearish; 5- and 15-day moving averages are declining.
Trading recommendation:
The pair is trading below its pivot point. It is likely to trade in a lower range as far as it remains below its pivot point. A short position is recommended with the first target at 98.15 in view; a breach of this target will move the pair further downwards to 98.55. The pivot point stands at 97.65. In case the price moves in the opposite direction, bounces back from support, and moves above its pivot point, then the price is most favorably expected to move further to the upside, In that scenario a long position is recommended with the first target at 97.45 and the second target at 97.
Resistance levels:
98.1
98.55
98.9
Support levels:
97.45
97
96.75
