FX.co ★ USDJPY: further upside expected (Nov 04, 2014)

Overview:
USD/JPY is trading in a range. It is underpinned by positive dollar sentiment (ICE spot dollar index last 80.24 versus 79.74 early Thursday) after a surprise surge in U.S. ISM-Chicago PMI to 65.9 in October from 55.7 in September, the biggest monthly increase in more than 30 years (versus forecast for a drop to 55.0). USD/JPY is also supported by demand from Japan importers; higher U.S. Treasury yields. But dollar sentiment is dented by smaller-than-expected 10,000 drop in U.S. jobless claims to 340,000 (versus 335,000 forecast) for the week ended October 26. USD/JPY upside is also limited by Japan exporter sales; unwinding of JPY-funded carry trades amid increased investor risk aversion (VIX fear gauge rose 0.73% to 13.75, S&P fell 0.38% overnight) as the Federal Reserve's optimistic assessment of the U.S. economy suggests the central bank could still begin to taper its stimulus $85 billion-a-month bond-purchase program in December; positions adjustment before Japan's long weekend (financial markets in Japan are shut for a holiday on Monday). Yen crosses are vulnerable to 0100 GMT October final CFLP China manufacturing PMI, 0145 GMT October final HSBC China manufacturing PMI data.

Technical comment:
Daily chart is still positive-biased as MACD and stochastics are bullish, although the inside-day-range pattern was completed Thursday.

Trading recommendations:

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 99 and the second target at 99.3. In an alternative scenario, if the price moves below its pivot points, short positions are recommended with the first target at 98.05 the breach of this target will move the pair further downwards and one may expect the second target at 97.75. The pivot point stands at 98.4.

Resistance levels:
99
99.3
99.6
Support levels:
98.05
97.75
97.4