Fundamental Overview:
USD/JPY is expected to consolidate with bullish bias after hitting a five-week high of 121.49 on Wednesday. USD/JPY is underpinned by the positive dollar sentiment (ICE spot dollar index last 95.59 versus 95.29 early Wednesday) on back of continued impact of strong data on the US April housing starts and San Francisco Fed research paper that said the US Q1 GDP weakness may have been exaggerated by seasonal factors. USD/JPY is also supported by demand from Japan importers and ultra-loose Bank of Japan's monetary policy. But USD sentiment is dented by the dovish minutes of the FOMC April meeting which showed Fed officials doubted they would be ready to raise short-term interest rates by midyear. USD/JPY gains are also tempered by lower US Treasury yields (2-year slipped 1.6 bps to 0.593% Wednesday), Japan's exports and diminished investor risk appetite (VIX fear gauge rose 0.23% to 12.88, S&P 500 closed 0.09% lower at 2,125.85 overnight after hitting record high 2,134.72).
Technical comment:
The daily chart is positive-biased as the MACD and stochastics are bullish, although latter is at overbought levels, five- and 15-day moving averages are advancing.
Trading recommendations:
The pair is trading above its pivot point. It is likely to trade in a wider range as long as it remains above its pivot point. As long as the price holds above its pivot point, long positions are recommended with the first target at 121.50 and the second target at 122. In the alternative scenario, short positions are recommended with the first target at 120.30 if the price moves below its pivot points. A break of this target is likely to push the pair further downwards, and one may expect the second target at 120.10. The pivot point is at 120.70.
Resistance levels:
121.50
122
122.45
Support levels:
120.30
120.10
119.75
