Overview:
USD/JPY--to trade in lower range. Undermined by flows to safe-haven JPY and unwinding of JPY-funded carry trades amid increased risk aversion (VIX fear gauge rose 3.68% to 15.22; S&P fell 0.63% overnight) after weak euro-zone PMI data; minutes from Federal Reserve's latest meeting stoking fears U.S. central bank might end its stimulus program sooner than had been expected; worries over the U.S. $1.2 trillion automatic spending cuts set to kick in March 1 as Washington creeps toward sequestration without a resolution in sight; higher-than-expected rise in latest U.S. weekly jobless claims to 362,000 (vs 350,000 forecast); surprise fall in Philadelphia Fed's index of general business activity to minus 12.5 in February from minus 5.8 in January (vs forecast for rise to plus 3.0); weaker-than-expected 0.2% gain in Conference Board's Leading Economic Index for January (vs +0.3% forecast). USD/JPY also weighed by Japan exporter sales; reduced expectations that Japan could embark on foreign bond buying to stimulate its economy after PM Abe cast doubt on the option earlier this week. But USD/JPY losses tempered by demand from Japan importers; positive USD sentiment amid speculation that Fed's asset buying program may not prove as long-lived as many in the market had thought--Fed's Bullard said policy makers could possibly consider raising interest rates as soon as June 2014; positions adjustment ahead of weekend. USD/JPY daily chart mixed as MACD & stochastics in bearish mode, but five-day moving average meandering sideways above rising 15-day MA.
Preference:
Sell below 93.5 with targets at 92.75 and 92.2 in extension.
Support Levels:
S1 - 92.77 (Thursday's low)
S2 - 92.22-92.17 (Feb. 15 low-Feb. 8 low)
S3 - 91.61 (Feb. 1 low)
Alternative scenario:
Buy above 93.5. Above 93.5 look for further upside with 93.85 and 94.2 as targets.
Resistance Levels:
R1 - 93.87 (Thursday's high)
R2 - 94.22 (Monday's high)
R3 - 94.41-94.46 (Feb. 12 high-Feb. 11 two-and-a-half year high)
Technical Comment:
The pair is rebounding but stands below its new resistance, the RSI lacks upward momentum.