FX.co ★ Technical analysis of USD/JPY for January 21, 2015

Fundamental overview:
USD/JPY is expected to trade in a lower range. USD/JPY is underpinned by weak yen sentiment amid speculation that the BOJ might ease monetary policy further by cutting the interest rate on commercial banks' excess reserves at the central bank (currently at 0.1%). It is also boosted by yen-funded carry trades amid diminished risk aversion (VIX fear gauge eased 5.06% to 19.89; S&P 500 closed up 0.15% at 2,022.55 overnight) because of expectations that the ECB will unveil a large-scale bond-buying program on Thursday aimed at reviving Europe's economy, and by 7.3% on-year increase in China 4Q GDP (versus forecast +7.2%) that overshadowed a renewed slide in oil prices. USD/JPY is also supported by the higher shorter-dated U.S. Treasury yields (2-year at 0.499% versus 0.480% late Friday), broadly firmer dollar undertone (ICE spot dollar index last 93.00 versus 92.58 early Tuesday) and demand from Japan's importers. But USD sentiment is dented by lower than expected U.S. January NAHB housing market index of 57 (versus forecast 58). USD/JPY gains are also tempered by the Japanese export.

Technical comment:
The daily chart is mixed as the MACD is bearish, but stochastics is bullish at oversold levels.

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 116.80. A break of this target will move the pair further downward to 116.30. The pivot point stands at 118.05. 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, a long position is recommended with the first target at 118.40 and the second target at 118.85.

Resistance levels:
118.40
118.85
119.15

Support levels:
16.80
16.30
116