Overview:
USD/JPY is trading in a range. It is supported by the yen-funded trades amid positive investor risk sentiment (VIX fear gauge eased 1.64% to 13.2; S&P gained 0.33% overnight) as upbeat HSBC flash October manufacturing PMI for China, the world's second largest economy, and expectations that the Federal Reserve will continue its current pace of stimulus bond-buying well into 2014 boosted the outlook for global growth. USD/JPY is also buoyed by higher longer-dated U.S. Treasury yields; demand from Japan importers; narrower-than-expected U.S. August trade deficit of $38.8 billion (versus forecast $39.4 billion deficit); rise in Kansas City Fed's manufacturing composite index to 6 in October from 2 in September despite some drag from the partial federal shutdown. But USD/JPY upside is limited by Japan's exporter sales; the soft dollar sentiment (ICE spot dollar index hit near-nine-month low of 79.081 overnight) amid increased assumptions for a more accommodative Federal Reserve--many believe the Fed won't begin to wind down its bond-buying stimulus program until at least March 2014--after Markit U.S. flash manufacturing PMI fell to one-year low of 51.1 October from final September reading of 52.8, and U.S. jobless claims in the week ended Oct. 19 declined by smaller-than-expected 12,000 to 350,000 (versus 340,000 forecast), although the count was viewed as distorted due to computer problems in California; positions adjustment before the weekend.
Technical comment:
Daily chart is negative-biased as MACD and stochastics are bearish; the 5-day moving average is falling below the 15-day MA.
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 96.8 in view; a breach of this target will move the pair further downwards to 96.55. The pivot point stands at 97.5. In case the price moves in the opposite direction, bounces back from support, and moves above its pivot point, 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 97.8 and the second target at 98.2.
Support levels:
96.8
96.55
96.2
Resistance levels:
97.8
98.2
98.5
