Overview:
USD/JPY is consolidating with bearish bias after hitting a two-week high of 98.71 Tuesday. It is undermined by negative dollar sentiment; flows to haven JPY and unwinding of JPY-funded carry trades amid increased risk aversion (VIX fear gauge surged 16.12% to 18.66, S&P fell 0.71% overnight) as efforts to break the budget impasse in Washington faltered in the Republican-controlled Congress, increasing the chance of a U.S. debt default as Thursday's deadline to raise the $16.7 trillion federal borrowing limit looms; Fitch Ratings placing the AAA credit rating of the U.S. on negative watch, citing the impasse in Washington over raising the debt ceiling; worse-than-expected drop in Empire State's business conditions index to 1.52 in October from 6.29 in September (versus 5.5 forecast). USD/JPY is also weighed by Fed's Fisher saying it could be hard for him to argue for reducing the program at the central bank's Oct. 29-30 policy meeting because of the budget showdown in Washington; Japan exporter sales. But USD/JPY losses are tempered by demand from Japan importers.
Technical outlook:
Daily chart is still positive-biased as MACD & stochastics are bullish; the 5-day moving average is above the 15-day MA and 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 97.85 in view; a breach of this target will move the pair further downwards to 97.6. The pivot point stands at 98.7. In case the price moves in the opposite direction, bounces back from support, and moves above its pivot point, then 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 99.1 and the second target at 99.65.
Support levels:
97.85
97.6
97.3
Resistance levels:
99.1
99.65
99.95