FX.co ★ Technical analysis of USD/JPY for January 22, 2014

Overview:

USD/JPY is expected to consolidate as markets await the Bank of Japan's interest rate announcement.The BOJ is expected to take no action, according to all the 10 economists polled by The Wall Street Journal. USD/JPY is undermined by the broadly weaker dollar undertone, Japan exporter sales. The ICE spot dollar index was recently trading at 81.09, well below its Tuesday high of 81.388 after paring gains that arise from The Wall Street Journal report that the Federal Reserve is likely to cut its monthly bond purchases by $10 billion to $65 billion at the end of its two-day meeting on Jan. 29. But USD/JPY downside is limited by ultra-loose BOJ monetary policy, demand from the Japan importers. Risk appetite contained as U.S. stocks are closed mixed overnight (S&P gained 0.28%, DJIA fell 0.27%) but the VIX fear gauge rose 3.46% to 12.87. Daily chart is mixed as MACD is bearish, but stochastics is neutral.

Trading recommendation:

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 104.75 and the second target at 104.9 in mind. In an alternative scenario, if the price moves below its pivot points, short positions are recommended with the first target at 103.5.A breach of this target will move the pair further downwards and one may expect the second target at 103.2. The pivot point stands at 103.9.

Resistance levels:
104.75
104.9
105.05

Support levels:
103.5
103.2
102.9