Overview:
USD/JPY is expected to trade in a higher range. It is underpinned by the positive dollar sentiment (ICE spot dollar index is 80.28 versus 80.18 early Thursday) and the yen-funded carry trades amid improved investors' risk appetite (VIX fear gauge eased 4.58% to 14.79; S&P rose 0.6% overnight) on rise in the Markit U.S. flash manufacturing PMI to near-four-year high of 56.7 in February from a final 53.7 in January. Investors are shrugging off a fall in the HSBC China flash manufacturing PMI to the seven-month low of 48.3 in February from the final reading of 49.5 in January. That gives the benefit of the doubt for a batch of the soft U.S. economic reports to the harsh winter weather. USD/JPY is also supported by Japan's record trade deficit of Y2.79 trillion in January, higher U.S. Treasury yields, demand from the Japanese importers and loose monetary policy of the Bank of Japan. But the dollar sentiment dented by the smaller-than-expected drop of 3,000 in the U.S. jobless claims that posted 336,000 in the week ended Feb. 15 (versus 335,000 forecast); lower-than-expected U.S. January core CPI of +0.1% (versus +0.2% forecast); worse-than-expected drop in the U.S. Philadelphia Fed's index of general business activity that came in at -6.3 in February (versus plus 7.4 forecast) from 9.4 in January, and weaker-than-expected 0.3% rise in the U.S. Conference Board Leading Economic Index in January (versus +0.4% forecast). The USD/JPY gains are also tempered by Japan's exports sales and positions adjustment before weekend.
Technical сomment:
Daily chart positive-biased as MACD and stochastics are bullish
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 103.05 and the second target at 103.40. In an alternative scenario, if the price moves below its pivot points, short positions are recommended with the first target at 101.65. A breach of this target will push the pair further downwards and one may expect the second target at 101.35. The pivot point is at 102.
Resistance levels:
103.05
103.40
103.85
Support levels:
101.65
101.35
101
