Fundamental Overview:
USD/JPY is expected to trade in a higher range after hitting a near-six-year high at 106.47 on Tuesday. It is underpinned by the higher U.S. Treasury yields (10-year at 2.502% versus 2.471% late Monday) after hawkish comments by the San Francisco Federal Reserve triggered speculation that the Fed might sound less dovish in next week's policy statement, and that rate hikes are potentially nearer than markets have anticipated. USD/JPY is also supported by demand from Japanese importers; healthier-than-expected rise in U.S. NFIB Index of Small Business Optimism to 96.1 in August from 95.7 in July (versus forecast 96.0); negative JPY sentiment as recent data pointing to a struggling Japanese economy suggest the Bank of Japan may yet provide more stimulus. However, USD/JPY gains are tempered by Japanese export sales; profit-taking on long USD positions.
Data focus:
2350 GMT Japan will release July orders received for machinery as well as August corporate goods price index.
1400 GMT U.S. will publish July wholesale trade report.
Technical comment:
The daily chart is still positive-biased as MACD is bullish, stochastics stays elevated at overbought zone, 5 and 15-day moving averages are advancing.
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 106.60 and the second target at 107. In an alternative scenario, if the price moves below its pivot points, short positions are recommended with the first target at 105.40. A break of this target would push the pair further downwards and one may expect the second target at 104.95. The pivot point is at 105.70.
Resistance levels:
106.60
107
107.35
Support levels:
105.40
104.95
104.70
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