Overview:
USD/JPY is consolidating with bullish bias after hitting five-year high 104.37 Thursday as markets await Bank of Japan's monetary policy decision: BOJ is expected to stay pat today. Liquidity in markets is thinning as yearend holidays loom. USD/JPY is buoyed by bullish dollar sentiment after the Federal Reserve on Wednesday unexpectedly announced it would scale down its bond-buying by $10 billion to $75 billion a month, although it reiterated that interest rates are likely to stay close to zero "well past the time that the unemployment rate declines below 6.5%". USD/JPY is also supported by higher U.S. Treasury yields; demand from Japan importers; expectations that the BOJ will ease monetary policy further next year ahead of Japan's national sales tax hike, due in April. But dollar sentiment is dented by larger-than-expected 379,000 initial claims for jobless benefits in the week ended Dec. 14 (versus 345,000 forecast); bigger-than-expected 4.3% fall in U.S. existing home sales to 4.9 million in November (versus forecast for 2% drop to 5.02 million); smaller-than-expected rise in Philadelphia Fed's general business conditions index to 7.0 in December (versus 8.5 forecast) from 6.5 in November. USD/JPY gains are also tempered by Japan exporter sales; positions adjustment before weekend.
Technical Comment:
Daily chart is positive-biased as MACD and stochastics are bullish; the five- and 15-day moving averages are advancing.
Trading recommendations:
The pair is trading above its pivot point. It is likely to trade in a higher range as far as it remains above its pivot point. As far as the price is above its pivot point, a long position is recommended with the first target at 104.6 and the second target at 105. In an alternative scenario, if the price moves below its pivot points, short positions are recommended with the first target at 103.4. The breach of this target will move the pair further downwards and one may expect the second target at 103.1. The pivot point stands at 103.75.
Resistance levels:
104.6
105
105.4
Support levels:
103.4
103.1
102.75
