Overview:
USD/JPY is trading in lower range. The rate is undermined by profit-taking on short-yen positions--market participants turning wary that the anti-yen trade is getting overcrowded. USD sentiment was dented after U.S. IBD/TIPP Economic Optimism Index had declined 2.4% to 45.1 in May from 46.2 in April as consumers grew more pessimistic about the economy, while U.S. consumer credit only increased by $8 billion in March (vs. +$16 billion forecast). USD/JPY is also weighed by Japan exporter sales. But USD/JPY losses tempered by demand from Japan importers; widening USD-JPY interest rate differential; Bank of Japan's aggressive easing measures to help reach its 2% inflation target; yen-funded carry trades amid positive global risk sentiment (S&P rose 0.52% overnight to finish at record high of 1625.96) in wake of Reserve Bank of Australia's surprise decision to lower its benchmark interest rate by 25 basis points to record low 2.75%, bolstering investor confidence over continued stimulus from world's major central banks. Yen crosses are vulnerable to China April trade balance data. Daily chart is mixed as MACD is bearish; but stochastics is in bullish mode.
Trading recommendations:
The pair is trading below its pivot point. The pair is likely to trade in lower range as far as it remains below its pivot point. Short position is recommended with the first target at 98.55 in view, breach of this target will move further the pair downward and you should expect the second target at 98.35. Pivot point stands at 99.10. In case the price moves in opposite direction and returns from its support and moves above its pivot point then trading in higher range is the most favorable and buy position is recommended above its pivot with the first target at 99.45 and the second target at 99.77.
Support levels:
S1 - 98.55
S2 - 98.35
S3 - 98
Resistance levels:
R1 - 99.45 (Monday's high)
R2 - 99.77 (April 24 high)
R3 - 99.89-99.95 band (April 22 high-April 11 high)
