Technical analysis of USD/JPY for December 15, 2014 Market Analysis Review

Fundamental overview:

USD/JPY is expected to trade with risks skewed to downside. It is undermined by the weaker USD sentiment (last ICE spot dollar index 88.20 versus 88.52 on early Friday) as the U.S. Treasury yields fell (10-year at 2.103% versus 2.178% on late Thursday), lower than expected and the U.S. PPI of dropped 0.2% on month in November (versus forecast -0.1%) and haven buying of the U.S. Treasury bonds. USD/JPY is also weighed by the Japanese export sales, flows to haven JPY amid increased risk aversion (VIX fear gauge rose 4.98% to 21.08, S&P 500 closed 1.62% lower at 2,002.33 on Friday) amid growing concerns over the global economy as oil prices fell to five-and-a-half-year lows (Nymex crude hit $56.25/bbl this morning, its lowest figure since May 18, 2009) after the International Energy Agency lowered its estimate for global oil demand growth. But USD sentiment is soothed by the stronger than expected rise in University of Michigan preliminary U.S. consumer sentiment index to 93.8 in December from November's 88.8 (versus forecast 90.0). USD/JPY losses are also tempered by Japan's ruling Liberal Democratic Party's well anticipated victory in the weekend's snap election regarded as an endorsement of Prime Minister Abe's economic programs; demand from Japan's import and Bank of Japan's large-scale monetary easing policy.

Technical comment:
The daily chart is negative-biased as the MACD and stochastics are bearish; five-day moving average is falling below 15-day moving average although intraday range pattern was completed on Friday.

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 its pivot point. Short positions are recommended with the first target at 117.80. A break of this target will move the pair further downwards to 117.40. The pivot point stands at 119.10. In case the price moves in the opposite direction and bounces back from the support level, then it will move above its pivot point. It is likely to move further to the upside. In that scenario, a long position is recommended with the first target at 119.50 and the second target at 120.10.

Resistance levels:

119.50

120.10

120.45



Support levels:
117.80

117.40

117.05

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