Overview:
USD/JPY is expected to consolidate. It is undermined by the unwinding of JPY-funded carry trades amid diminished risk appetite (VIX fear gauge rose 0.22% to 13.43) as U.S. stocks closed mostly lower overnight (S&P 500 down 0.14%, Nasdaq off 0.4%, DJIA up 0.2%) despite stronger-than-expected China April trade data, growing expectations that the European Central Bank may loosen policy further in June, and Federal Reserve Chairwoman Janet Yellen reiterating interest rates would remain near zero until labor-market participation rises and inflation climbs closer to the central bank's preferred level of 2%. USD/JPY is also weighed by the lower short-term U.S. Treasury yields and Japan exporter sales. But USD/JPY losses are tempered by the demand from Japan importers, positive dollar sentiment (ICE spot dollar index last 79.43 versus 79.23 early Thursday), helped by bigger-than-expected 26,000 drop in U.S. jobless claims in week ended May 3 to 319,000 (versus 325,000 forecast) and positions adjustment before the weekend.
Technical сomment:
Daily chart is negative-biased as MACD and stochastics are bearish, five-day moving average is below 15-day MA and is declining.
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 102 and the second target at 102.20. In an alternative scenario, if the price moves below its pivot points, short positions are recommended with the first target at 101.30. A breach of this target will push the pair further downwards and one may expect the second target at 101.05. The pivot point is at 101.50.
Resistance levels:
102
102.20
102.50
Support levels:
101.30
101.05
100.75
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