Fundamental overview:
USD/JPY is expected to trade with bearish bias after hitting five-week low 105.19 on Wednesday. It is undermined by the flows to haven JPY and unwinding of JPY-funded carry trades amid increased risk aversion (VIX fear gauge closed up 15.18% at 26.25 Wednesday after hitting near-three-year high of 31.06, S&P 500 closed 0.81% lower at 1,862.494 overnight) and negative dollar sentiment (ICE spot dollar index last 84.92 versus 85.88 early Wednesday) as fears mount that the U.S. may not be immune to economic slowdown elsewhere after larger-than-expected 0.3% on-month drop in U.S. September retail sales (versus forecast -0.1%), much-larger-than-expected fall in Empire State's business conditions index to 6.17 in October from 27.54 in September (versus forecast 20.0), smaller-than-expected 0.2% increase in U.S. August business inventories (versus forecast +0.4%). USD/JPY is also weighed by the Japan exporter sales and lower U.S. Treasury yields (10-year last at 2.129% versus 2.206% late Tuesday, after plunging to 17-month low of 1.865% overnight) as surprise 0.1% on-month drop in U.S. September PPI for first decline in more than a year (versus forecast for 0.1% rise) pushed back expectations that the Federal Reserve might increase interest rates in 2015. But USD/JPY losses are tempered by the demand from Japan importers and ultra-loose Bank of Japan's monetary policy.
Technical comment:
Daily chart is negative-biased as bearish outside-day-range pattern was completed on Wednesday, MACD is bearish, stochastics stays suppressed at oversold zone, five-day moving average is below 15-day MA and is declining.
Trading recommendations:
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. Short position is recommended with the first target at 105.50. A break of this target will move the pair further downwards to 105.20. The pivot point stands at 106.65. In case the price moves in the opposite direction and bounces back from the support level, then it will move above its pivot point. It is likely to move further to the upside. In that scenario, a long position is recommended with the first target at 107.05 and the second target at 107.55.
Resistance levels:
107.05
107.55
107.85
Support levels:
105.50
105.20
104.85
The material has been provided by InstaForex Company - www.instaforex.com
