Overview:
USD/JPY is consolidating with bullish bias after hitting four-and-a-half-year high of 102.44 on Tuesday. The rate is underpinned by positive dollar sentiment on strong U.S. equities (S&P powered to record high of 1651.1 overnight before closing up 1.01% at 1650.34); brighter U.S. fiscal outlook after Congressional Budget Office said U.S. federal deficit is expected to shrink sharply to $642 billion this year, well below the $845 billion deficit it projected in February; rise in U.S. NFIB Index of Small Business Optimism to 92.1 last month from 89.5 in March, adding to signs that U.S. economy is on the mend; higher U.S. Treasury yields; expectations that Federal Reserve is likely to wind up its monetary easing measures well before other major central banks do. USD/JPY is also supported by negative yen sentiment on Bank of Japan's aggressive easing measures to help reach its 2% inflation target; demand from Japan importers and investment trusts. But USD/JPY gains also tempered by sales from Japan exporters. Data focus: 23:50 GMT Japan March tertiary industry index, 02:00 GMT China April foreign direct investment, 05:00 GMT Japan April consumer confidence survey; 12:30 GMT U.S. April PPI, May Empire State manufacturing survey; 13:00 GMT U.S. March Treasury international capital data, 13:15 GMT U.S. April Industrial production & capacity utilization, 14:00 GMT U.S. May NAHB housing market index. Daily chart is positive-biased as bullish outside-day-range pattern completed Tuesday; MACD and stochastics are bullish, although latter at overbought; five- and 15-day moving averages are advancing.
Trading recommendations:
The pair is trading above its pivot point. It is likely to trade in higher range as far as it remains above its pivot point. As far as the price is above its pivot point, trading in higher range is most favorable and buy position is recommended above its pivot with the first target at 102.05 and the second target at 102.4. You should keep in view short position below the pivot keep of the first target at 100.54, breach of this target will move the pair downward further and expect the second target at 99.95. The pivot point stands at 100.95
Support levels:
S1 - 101.25 (Tuesday's low)
S2 - 100.54 (Friday's low)
S3 - 99.95 (previous cap set April 11)
Resistance levels:
R1 - 102.9
R2 - 103.1 (14, 2008 reaction high)
R3 - 103.26
