Overview:
USD/JPY is expected to trade in a higher range after hitting a three-day high at 102.37 on Tuesday. USD/JPY is undermined by unwinding JPY-funded carry trades amid diminished investor risk appetite (S&P 500 fell 0.16% to close at 1,933.75 overnight) on the weak sentiment data from Germany and festering geopolitical concerns over Ukraine and the Middle East. USD/JPY is also weighed by Japanese export sales. But the USD sentiment is boosted by the rise in U.S. NFIB's small-business optimism index to 95.7 in July from 95.0 in June. Besides, USD/JPY downside move is limited by the demand from Japanese importers, higher long-term U.S. Treasury yields (10-year yield last 2.449% versus 2.42% late Monday) and the broadly firmer dollar undertone (ICE spot dollar index last 81.52 versus 81.47 early Tuesday). Annual 'Obon' summer holiday (Aug. 13-15) in Japan: financial markets will not be officially closed during this period, but many domestic investors are expected to be absent, resulting in subdued trading activity.
Technical comment:
The daily chart is mixed as stochastics is neutral, MACD is turning bearish.
Trading recommendations:
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 long as the price is keeping above its pivot point, a long position is recommended with the first target at 102.55 and the second target at 102.75. In an alternative scenario, if the price moves below its pivot points, short positions are recommended with the first target at 101.95. A break of this target would push the pair further downwards and one may expect the second target at 101.65. The pivot point is at 102.15.
Resistance levels:
102.55
102.75
103
Support levels:
101.95
101.65
101.40
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