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Fundamental outlook:
USD/JPY is expected to trade with bearish bias. It is undermined by the negative dollar sentiment (ICE spot dollar index last 97.65 versus 98.39 early Thursday) after a weaker-than-expected increase of 2.0% in the U.S. March housing starts (versus forecast +15.9%), a larger-than-expected drop of 5.7% in the U.S. March building permits (versus forecast -0.2%), and more-than-expected U.S. jobless claims of 294,000 for the week ended April 11 (versus forecast 280,000). The pair is also weakened by the comments of Fed's Lockhart saying that unexpected economic weakness over the start of the year means it will likely take longer to gain enough confidence in the outlook to raise short-term interest rates; and Fed's Rosengren saying that the dollar's strength was hurting U.S. growth, which could lead to a delay in raising rates. USD/JPY is also weighed by the lower short-term U.S. Treasury yields (2-year at 0.487% versus 0.504% late Wednesday) and Japan's exports. But the USD sentiment is soothed by a stronger-than-expected rise in the Philadelphia Fed Business index to +7.5 in April from 5.0 in March (versus forecast +7.2). USD/JPY losses are also tempered by the demand from the Japanese importers, the ultra-loose Bank of Japan's monetary policy and positions adjustment ahead of the weekend.
Technical comment:
The daily chart is negative-biased as the MACD and stochastics are bearish; five-day moving average is below 15-day moving average and is declining.
Trading recommendations:
The pair is trading below its pivot point. It is likely to trade in a lower range as far as it remains below the pivot point. Short positions are recommended with the first target at 118.30. A break of that target will move the pair further downwards to 117.95. The pivot point stands at 119.50. In case the price moves in the opposite direction and bounces back from the support level, it will move above its pivot point. It is likely to move further to the upside. According to that scenario, long positions are recommended with the first target at 119.75 and the second target at 120305.
Resistance levels:
119.75
120.05
120.45
Support levels:
118.30
117.95
117.35
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