Overview:
USD/JPY is trading in lower range after hitting five-year high 105.45 Thursday. Liquidity is thin in Asia today as financial markets in Japan are shut for a holiday. USD/JPY is undermined by unwinding of JPY-funded carry trades amid increased risk aversion (VIX fear gauge rose 3.72% to 14.23, S&P fell 0.89% overnight) as drop in China, U.S. and U.K manufacturing PMI for December dented global growth outlook. But USD/JPY losses temper by positive dollar sentiment (ICE spot dollar index last 80.58 versus 80.15 early Thursday) on smaller-than-expected fall in U.S. ISM manufacturing PMI to 57.0 in December (versus 56.8 forecast) from 57.3 in November, stronger-than-expected 1.0% rise in U.S. November construction spending (versus +0.8% forecast), fewer-than-expected 339,000 U.S. initial claims for jobless benefits in the week ended Dec. 28 (versus 345,000 forecast). Yen gains also temper by expectations that the Bank of Japan will ease monetary policy further ahead of Japan's national sales tax hike which is due in April, sell yen orders from Japan importers, positions adjustment before weekend.
Data focus:
1445 GMT U.S. December ISM-NY business index,
1830 GMT Fed's Lacker speaks.
Technical Comment:
Daily chart is negative-biased as MACD & stochastics turned bearish; bearish outside-day-range pattern completed Thursday.
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 104. A breach of this target will move the pair further downwards to 103.8. The pivot point stands at 104.5. In case the price moves in the opposite direction, it will bounce back from support and move 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 104.85 and the second target at 105.15.
Resistance levels:
104.85
105.15
105.45
Support levels:
104
103.8
103.5
