FX.co ★ USD/JPY: under pressure

Overview:
The USD/JPY is to trade with risks skewed lower. The pair is undermined by weaker USD sentiment as the door opened to more U.S. quantitative easing after the Federal Reserve kept its easy-money policies in place as expected. However, it signaled that it is "prepared to increase or reduce" its asset-purchase program, depending on the outlook for the job market and inflation. A shift from earlier this year when officials didn't explicitly raise the possibility of increased bond purchases. The USD sentiment hurt further by bigger-than-expected fall in U.S. ISM manufacturing PMI to 50.7 in April from 51.3 in March (vs 50.8 forecast); a surprise 1.7% drop in U.S. March construction spending (vs forecast for 0.7% increase); ADP report showing smaller-than-expected 119,000 increase in U.S. private-sector jobs in April (vs +155,000 forecast), which is the smallest gain since September. Also, there are stoking worries that U.S. April non-farm payroll report due Friday will disappoint.

The USD/JPY is also weighed by lower U.S. Treasury yields; Japan exporter sales; flows to safe-haven JPY and unwinding of JPY-funded carry trades amid increased risk aversion (VIX fear gauge rose 7.17% to 14.49, S&P fell 0.93% overnight) amid heightened fears of global economic slowdown after disappointing U.S. and Chinese data (China's official manufacturing PMI fell to 50.6 last month from 50.9 in March). But the USD/JPY losses were tempered by demand from Japan importers. The Bank of Japan's aggressive easing measures to help reach its 2% inflation target. Daily chart negative-biased as the MACD & stochastics bearish; the five-day moving average below 15-day MA and declining.

Data to focus:
1230 GMT U.S. 1Q preliminary non-farm productivity & unit labor costs, U.S. April 27 weekly jobless claims, U.S. March trade balance
1345 GMT U.S. April ISM-NY report on business.

Trading recommendations:
The pair is trading below its pivot point. The pair is likely to trade in lower range as far as it remains below its pivot point. Short position is recommended with the first target at 96.99 in view, breach of this target will move further the pair downward and you should expect the second target at 96.55 . Pivot point stands at 97.75. In case the price moves in opposite direction and returns from its support and moves above its pivot point then trading in higher range is the most favorable and buy position is recommended above its pivot with the first target at 98.13 and the second target at 98.5.

Support levels:
S1 - 97.02-96.99 (Wednesday's low-Tuesday's low)
S2 - 96.55
S3 - 96.3

Resistance levels:
R1 - 98.13-98.20 band (Tuesday's high-Monday's high)
R2 - 98.5
R3 - 98.8