FX.co ★ Technical analysis of USD/JPY for Feburary 20, 2014

Overview:

USD/JPY is expected to trade in a lower range. It is underpinned by the positive dollar sentiment (ICE spot dollar index last 80.19 versus 80.00 early Wednesday) after the Federal Reserve meeting minutes showed support for the current pace of cutbacks to its bond-buying program and the Fed's officials also started to debate when to begin raising interest rates, with a few arguing, a rate increase may be appropriate "relatively soon." USD/JPY is also supported after Fed's Bullard told The Wall Street Journal that a strong U.S. economy is facing its best prospects since the financial crisis will likely allow the Federal Reserve to steadily reduce its monthly bond purchases, while Fed's Williams reiterated the bar is high for the Fed to change course on winding down its bond-buying program, bigger-than-expected 0.2% on-month rise in the U.S. January PPI (versus +0.1% forecast), higher U.S. Treasury yields; demand from Japan importers and loose Bank of Japan's monetary policy. But the dollar sentiment is dented by larger-than-expected 16.0% fall in the U.S. January housing starts (versus forecast 4.9% decrease) and 5.4% drop in the U.S. January building permits (versus forecast 1.1% decrease). USD/JPY gains are also tempered by the Japanese export sales and unwinding of the JPY-funded carry trades amid increased risk aversion (VIX fear gauge rose 11.75% to 15.5, S&P fell 0.65% overnight) as minutes from last month's Fed meeting bolstered expectations for the steady pace of withdrawal of stimulus.

Technical сomment:
Daily chart is positive-biased as MACD and stochastics are bullish, although inside-day-range pattern was completed on Wednesday.

Trading recommendation:

The pair is trading below its pivot point. It is likely to trade in a lower range as far as it remains below its pivot point. Short position is recommended with the first target at 101.5 in mind. A breach of this target will move the pair further downwards to 101.2. The pivot point stands at 102.45. In case the price moves in the opposite direction, bounces back from support level, and then moves above its pivot point, it is most favourably expected to move further to the upside. In that scenario, a long position is recommended with the first target at 102.75 and the second target at 103.05.

Resistance levels:
102.75
103.05
103.45

Support levels:
101.5
101.2
100.95