Overview:
USD/JPY will trade in higher range undermined by weaker dollar sentiment (ICE spot dollar index last 80.67 versus 80.86 early Monday) after surprise drop in U.S. ISM non-manufacturing composite index to 53.0 in December from 53.9 in November (defying forecast for rise to 54.5), while the U.S. ISM non-manufacturing new orders index fell sharply to contractionary 49.4 in December - the lowest level since May 2009 - from 56.4 in November. USD/JPY was also weighed by lower U.S. Treasury yields and Japan exporter sales. But dollar sentiment was smoothed by stronger-than-expected 1.8% rise in U.S. factory orders in November (versus +1.5% forecast). USD/JPY losses were also tempered by demand from Japan importers, expectations that the Bank of Japan will ease monetary policy further ahead of Japan's national sales tax hike which is due in April, and caution ahead of Friday's U.S. December non-farm payroll report.
Technical Comment:
Daily chart is negative-biased as MACD and stochastics are bearish; bearish outside-day-range pattern was completed Monday.
Trading recommendation:
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 104.8 and the second target at 104.95 in mind. In an alternative scenario, if the price moves below its pivot points, short positions are recommended with the first target at 103.8.The breach of this target will move the pair further downwards and one may expect the second target at 103.35. The pivot point stands at 104.
Resistance levels:
104.8
104.95
105.15
Support levels:
103.8
103.35
103
