FX.co ★ USDJPY: upside expected (Nov 06, 2013)

Overview:
USD/JPY is trading in a higher range. It is underpinned by the stronger dollar sentiment (ICE spot dollar index last 80.69 versus 80.57 early Tuesday) after a surprise rise in the U.S. ISM non-manufacturing PMI to 55.4 in October from 54.4 in September (versus forecast for a drop to 54.0), while the employment sub-index increased to 56.2 last month from 52.7 in September, bolstering odds that the Federal Reserve is closer to taper its $85 billion-a-month bond-purchase program than many market participants have been expecting, possibly as early as at its next policy meeting on Dec. 17-18. USD/JPY is also supported by a rise in U.S. IBD/TIPP Economic Optimism Index to 41.4 in November from 38.4 in October; demand from Japan importers; higher U.S. Treasury yields. But USD/JPY gains are tempered by Japan exporter sales; unwinding of JPY-funded carry trades amid diminished investor risk appetite (VIX fear gauge rose 2.4% to 13.24, S&P fell 0.28% overnight) as upbeat U.S. ISM services PMI data raised worries that the Fed might soon withdraw its stimulus measures; profit-taking on USD-longs as market participants trim risk exposure ahead of Thursday's U.S. 3Q advance estimate GDP and Friday's U.S. October non-farm payrolls report.

Technical comment:
Daily chart is positive-biased as MACD and stochastics are bullish, although the latter is in the overbought area; the 5-day moving average is above the 15-day MA and advancing.

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 far as the price is above its pivot point, a long position is recommended with the first target at 99 and the second target at 99.3. In an alternative scenario, if the price moves below its pivot points, short positions are recommended with the first target at 97.75 the breach of this target will move the pair further downwards and one may expect the second target at 97.4. The pivot point stands at 98.05.

Resistance levels:
99
99.3
99.6
Support levels:
97.75
97.4
97