FX.co ★ Technical analysis of USD/JPY for January 02, 2014

Overview:
USD/JPY is expected to trade with bearish bias with risks skewed higher. Liquidity thin in Asia today as financial markets in Japan & New Zealand are shut for holiday. USD/JPY underpinned by yen-funded carry trades amid positive risk sentiment (S&P gained 0.4% Tuesday) as the U.S. Conference Board consumer confidence index rose more than expected to 78.1 in December (versus 76.5 forecast) from a revised 72.0 in November (first reported as 70); the U.S. December S&P / Case-Shiller 20-City home price index rose 13.6% for best increase since February 2006 (although slightly below +13.7% forecast); investor confidence over a strengthening the U.S. economy outweighs the Fed's gradual withdrawal of its stimulus attempts. USD/JPY also supported by higher the U.S. Treasury yields; yen sentiment is weak as the Bank of Japan is expected to ease monetary policy further next year ahead of Japan's national sales tax hike, due in April. But risk appetite was dented by bigger-than-expected fall in official China's manufacturing PMI that posted 51.0 in December from 51.4 in November (versus 51.2 forecast); drop in the U.S. ISM-Chicago PMI to 59.1 in December (versus 60.8 forecast) from 63 in November. USD/JPY gains also tempered by buy-yen orders from Japan exporters.

Technical Comment:
Daily chart positive-biased as MACD is bullish, stochastics stays elevated at overbought; five- & 15-day moving averages advancing.

Trading recommendation:

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. A short position is recommended with the first target at 104.8. A breach of this target will move the pair further downwards to 104.6. The pivot point stands at 105.45. In case the price moves in the opposite direction, it will bounce back from support and move above its pivot point. The price is most favorably expected to move further to the upside. In that scenario a long position is recommended with the first target at 105.85 and the second target at 106.05.

Resistance levels:
105.85
106.05
106.25
Support levels:
104.8
104.6
104.45