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

Fundamental Overview:

USD/JPY is expected to trade in a lower range after hitting a six-year high 110.09 on Wednesday. It is undermined by the selling of yen crosses amid increased risk aversion (VIX fear gauge rose 2.45% to 16.71, S&P 500 closed 1.32% lower at 1,946.16 overnight) on fresh concerns about global growth after weak manufacturing PMI data in several major economies, pro-democracy protests in Hong Kong and worries about Ebola after the U.S. reported the first case on Tuesday. USD/JPY is also weighed by the profit-taking on long USD positions ahead of the European Central bank's interest rate decision on Thursday and U.S. nonfarm payrolls data on Friday, Japan exporter sales and lower U.S. Treasury yields (10-year at 2.389% versus% 2.508% late Tuesday), weaker USD sentiment on worse-than-expected drop in U.S. ISM manufacturing PMI to 56.6 in September from 59.0 in August (versus forecast 58.2), surprise 0.8% decrease in U.S. August construction spending (versus forecast for 0.6% increase), lower final Markit U.S. September manufacturing PMI of 57.5 versus preliminary reading of 57.9. But USD sentiment is soothed by the ADP report showing larger-than-expected 213,000 increase in U.S. September private-sector jobs (versus forecast 209,000). USD/JPY losses are also tempered by the ultra-loose Bank of Japan's monetary policy and demand from Japanese importers.

Technical comment:
Daily chart is mixed as five and 15-day moving averages are advancing, but bearish outside-day-range pattern was completed on Wednesday, stochastics is turning bearish at overbought zone, MACD histogram bars turned negative.

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 108.30. A break of this target will move the pair further downwards to 107.95. The pivot point stands at 109.10. 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 109.55 and the second target at 110.

Resistance levels:
109.55
110
110.35

Support levels:
108.30
107.95
107.65