Fundamental overview:
USD/JPY is expected to trade in lower range. It is underpinned by the yen-funded carry trades amid receding investor risk aversion (VIX fear gauge eased 4.0% to 25.2, S&P 500 closed up 0.01% at 1,862.76 after falling as low as 1,835.02 overnight) after Fed's Bullard said the U.S. central bank should consider delaying the end of its bond-buying program, expected after its Oct. 28-29 meeting, to halt the decline in inflation expectations and improved USD sentiment after unexpected 23,000 drop in U.S. jobless claims to 14-year low of 264,000 in week ended Oct. 11 (versus forecast 290,000), stronger-than-expected 1.0% increase in U.S. September industrial production (versus forecast +0.4%) for largest monthly increase in three years, while capacity utilization rose more-than-expected to 79.3% in September--highest level since June 2008 (versus forecast 79.0%), less-than-expected drop in Philadelphia Fed's index of general business activity to 20.7 in October from 22.5 in September (versus forecast 19.9). USD/JPY is also supported by the higher U.S. Treasury yields (10-year at 2.152% versus 2.092% late Wednesday), demand from Japan importers and ultra-loose Bank of Japan's monetary policy and rebounding oil prices (Nymex crude settled up 92 cents Thursday at $82.70/bbl after hitting more-than-two-year low of $79.78/bbl). But USD sentiment is dented by the surprise drop in U.S. NAHB housing market index to 54 in October from 59 in September (versus forecast for no change). USD/JPY gains also tempered by Japan exporter sales; positions adjustment before weekend. Data focus: 1230 GMT U.S. September housing starts (forecast +4.6%) and building permits (forecast +2.3%), 1235 GMT Fed Chairwoman Janet Yellen speech, 1400 GMT preliminary University of Michigan October consumer sentiment survey (forecast 84.0). Daily chart is mixed as MACD is bearish, five-day moving average is below 15-day MA and is declining but stochastics turned bullish at oversold zone, inside-day-range pattern was completed on Thursday.
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 106.05. A break of this target will move the pair further downwards to 105.70. The pivot point stands at 106.80. 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:
106.05
105.70
105.50
The material has been provided by InstaForex Company - www.instaforex.com
