Overview:
USD/JPY is expected to trade in a higher range. Liquidity is thin as financial markets in the U.S. and U.K. are closed for public holidays. USD/JPY is underpinned by the yen-funded carry trades amid positive risk appetite (VIX fear gauge eased 5.57% to 11.36; S&P 500 closed above the 1,900 mark for the first time Friday as it ended up 0.42% at 1,900.53) on stronger-than-expected 6.4% increase in U.S. new home sales to 433,000 in April (versus 429,000 forecast) and continued impact from upbeat China May manufacturing PMI data. USD/JPY is also supported by the demand from Japan importers and positive dollar sentiment (ICE spot dollar index last 80.37 versus 80.22 early Friday) on strong U.S. housing data, Bank of Japan Gov. Kuroda telling The Wall Street Journal he doesn't think it's reasonable to expect the yen to appreciate against the dollar. But USD/JPY gains are tempered by the Japan exporter sales.
Technical Comment:
Daily chart is positive-biased as stochastics is rising from oversold zone, MACD is staging bullish crossover against its exponential moving average.
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 102.35 and the second target at 102.55. In an alternative scenario, if the price moves below its pivot points, short positions are recommended with the first target at 101.20. 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:
102.35
102.55
102.85
Support levels:
101.20
101.05
100.75
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