Overview:
USD/JPY is trading with risks skewed higher. The rate is underpinned by yen-funded carry trades amid positive risk appetite (VIX fear gauge eased 3.78% to 13.48; DJIA hit record high of 14,286.37 overnight) as investors confident that U.S. central bank will continue with easing measures to boost the economy after recent assurances from Fed's Bernanke and Yellen. USD/JPY is also supported by demand from Japan importers and investment trusts; expectations of more monetary easing measures from Bank of Japan to achieve 2% inflation target; positive USD sentiment and higher U.S. Treasury yields after surprise rise in U.S. ISM non-manufacturing composite index to 56 in February from 55.2 in January (vs. forecast for drop to 55.0). But USD/JPY gains also tempered by Japan exporter sales; caution ahead of tomorrow's BOJ's monetary policy decision.
Recommendation:
Buy above 93.5 with target at 93.9 and 94.2.
Resistance levels:
R1 - 93.9 (Tuesday's high)
R2 - 94.2
R3 - 94.5
Alternative scenario:
Sell below 93.5 with first target in sight at 93 and second target at 92.7.
Support levels:
S1 - 92.91 (Tuesday's low)
S2 - 92.69
S3 - 92.43 (Friday's low).
Technical comment:
Daily chart is mixed as MACD is bearish, but stochastics is in bullish mode; five-day moving average is staging bullish crossover against 15-day MA.