Overview:
USD/JPY is expected to consolidate in a higher range after hitting a six-day low at 101.09 on Friday. Liquidity was thin in Asia Monday as financial markets in Japan were shut for a public holiday. USD/JPY is supported by the yen-funded carry trades amid improved risk appetite (VIX fear gauge eased 17.06% to 12.06) as investors take into account geopolitical tensions as well as U.S. stocks rallied Friday (S&P 500 closed up 1.03% at 1,978.22). USD/JPY is also supported by the sell-yen orders from Japanese importers and higher U.S. Treasury yields. But USD/JPY gains are tempered by the buy-yen orders from Japanese exporters and a weaker USD sentiment on surprise drop in University of Michigan preliminary consumer sentiment index to 81.3 in July from final 82.5 in June (versus forecast for rise to 83.0) and smaller-than-expected 0.3% rise in Conference Board U.S. June index of leading economic indicators (versus +0.5% forecast).
Technical comment:
Daily chart is still negative-biased as MACD and stochastics are in bearish mode.
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 101.45. 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 101.60 and the second target at 101.60.
Resistance levels:
101.60
101.80
102.05
Support levels:
101.05
100.80
100.60
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