FX.co ★ Technical analysis of USD/JPY for October 20, 2014

Fundamental overview:

USD/JPY is expected to trade in a higher range. It is underpinned by the yen-funded carry trades amid the positive investor risk sentiment (VIX fear gauge eased 12.74% to 21.99; S&P 500 closed up 1.29% at 1,886.76 Friday) after surprise rise in University of Michigan preliminary U.S. October consumer sentiment index to 86.4 from the final September reading of 84.6 (versus forecast 84.0) and stronger-than-expected 6.3% on-month increase in U.S. September housing starts (versus forecast +4.6%); hints that U.K. monetary policy tightening could be delayed and that the European Central Bank would start more stimulus efforts within days. USD/JPY is also supported by the demand from Japanese importers, ultra-loose Bank of Japan's monetary policy amd higher U.S. Treasury yields (10-year at 2.199% versus 2.155% late Thursday) and the positive dollar sentiment (ICE spot dollar index last at 85.28 versus 84.96 early Friday) on upbeat U.S. consumer sentiment and housing data. But USD/JPY gains are tempered by Japan's export sales.

Technical comment:
Daily chart is mixed as MACD is bearish but stochastics is rising from the oversold zone.

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 long as the price is keeping above its pivot point, a long position is recommended with the first target at 107.55 and the second target at 108.15. In an alternative scenario, if the price moves below its pivot points, short positions are recommended with the first target at 106.05. A break of this target would push the pair further downwards and one may expect the second target at 105.70. The pivot point is at 106.50.

Resistance levels:
107.55
107.85
108.15

Support levels:
106.05
105.70
105.50