Overview:
USD/JPY is expected to trade in a lower range. It is undermined by the flows to haven JPY and unwinding of JPY-funded carry trades amid increased risk aversion (VIX fear gauge jumped 32.18% to 14.54, S&P 500 tumbled 1.18% overnight) as the tensions between the West and Russia are escalating after the U.S. and European Union imposed a fresh round of sanctions on Moscow over the Ukraine conflict. The Malaysia Airlines passenger jet with 295 people aboard was shot down near the Russia-Ukraine border. The risk sentiment is also dented after the Chinese construction company Huatong Road and Bridge Group Co. said it may default on both the bond principal and interest payments on a 400 million yuan ($64.5 million) bond that matures next week. USD/JPY is also weighed by the lower U.S. Treasury yields and Japanese export sales. But USD/JPY losses are tempered by the demand from Japanese importers and positions adjustment before Japan's long weekend (financial markets in Japan are shut for public holiday on Monday). U.S. data overnight were mixed as less-than-expected 302,000 U.S. jobless claims in the week ended July 12 (versus 310,000 forecast) and surprise rise in Philadelphia Fed's index of general business activity to 23.9 in July from 17.8 in June (versus forecast for drop to 16.0) were offset by surprise 9.3% on-month fall in U.S. housing starts to nine-month low of 893,000 in June (versus forecast for rise to 1.015 million) and unexpected 4.2% on-month decline in U.S. building permits to 963,000 in June (versus forecast for rise to 1.04 million).
Technical comment:
The daily chart is negative-biased as MACD and stochastics has turned bearish.
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 position is recommended with the first target at 101.05. A break of this target will move the pair further downwards to 100.80. The pivot point stands at 101.60. In case the price moves in the opposite direction and bounces back from the support level, then it will moves 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 101.80 and the second target at 102.05.
Resistance levels:
101.80
102.05
102.25
Support levels:
101.05
100.80
100.60
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