FX.co ★ USD/JPY: Consolidation with bearish outlook (December 18, 2013)

OvervieW:
USD/JPY is consolidating in lower range as markets await 19:00 GMT U.S. FOMC interest rate announcement, which is followed by Federal Reserve Chairman Ben Bernanke's press conference. Most market participants expect the Fed to put the scaling back of its monthly $85 billion bond-buying program on hold until the first quarter of 2014. U.S. November inflation data were mixed as headline CPI was unchanged from October (versus +0.1% forecast), but core CPI rose more-than-expected 0.2% (versus +0.1% forecast). USD/JPY is undermined by unwinding of JPY-funded carry trades amid diminished investor risk appetite (VIX fear gauge rose 1.12% to 16.21, S&P fell 0.31% overnight); lower U.S. Treasury yields; Japan exporter sales. But USD sentiment boosted by stronger-than-expected rise in U.S. NAHB housing market index to 58 this month (versus 55 forecast) from 54 in November. USD/JPY losses are also tempered by demand from Japan importers; expectations that the Bank of Japan will expand monetary easing measures further to support economic growth and to reach its 2% inflation target by the end of March 2016.

Technical comment:
Daily chart is negative-biased as MACD and stochastics are bearish.

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 102.45 and the second target at 102.15. In an alternative scenario, if the price moves below its pivot points, short positions are recommended with the first target at 103.4 The breach of this target will move the pair further downwards and one may expect the second target at 103.7. The pivot point stands at 103.15.

Resistance levels:
103.4
103.7
103.95

Support levels:
102.45
102.15
101.9