Overview:
USD/JPY is to trade in lower range after hitting six-month high 103.40 Tuesday. Undermined by negative USD sentiment (ICE spot dollar index last 80.00 versus 80.15 early Tuesday) on lower U.S. Treasury yields as market participants grew comfortable with the idea that the Federal Reserve will soon begin to scale back its $85-billion-a-month bond-buying program, possibly at its next policy meeting on Dec. 17-18. USD/JPY also weighed by Japan exporter sales; unwinding of JPY-funded carry trades amid increased risk aversion (VIX fear gauge rose 3.11% to 13.91, S&P fell 0.32% overnight) on increased prospects for Fed's withdrawal of stimulus. But USD/JPY losses tempered by demand from Japan importers; expectations that the Bank of Japan will expand monetary easing measures further to support economic growth and to reach its 2% inflation target by the end of March 2016.
Technical comment:
Daily chart mixed as MACD & stochastics bullish, 5- & 15-day moving averages advancing; but bearish outside-day-range pattern completed Tuesday.
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 102.2 in view; a breach of this target will move the pair further downwards to 102. The pivot point stands at 102.95. 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 103.35 and the second target at 103.7.
Resistance levels:
103.35
103.7
104
Support levels:
102.2
102
101.75
