Overview:
USD/JPY is consolidating after hitting four-and-a-half-year high of 103.32 on Friday. The rate is underpinned by positive dollar sentiment as expectations mounted that U.S. Federal Reserve might start winding down its $85 billion-a-month bond-buying program this year and U.S. stocks surged (S&P closed up 1.03% at record-high 1667.47 Friday) after University of Michigan consumer sentiment index rose to near-six-year high of 83.7 in early May (vs 78.0 forecast) from 76.4 in April, and U.S. Conference Board index of leading economic indicators increased 0.6% in April (vs +0.3% forecast). USD/JPY is also supported by higher U.S. Treasury yields; demand from Japan importers and investment trusts; Bank of Japan's aggressive easing measures to help reach its 2% inflation target. But yen sentiment boosted after Japan's economy minister Akira Amari Sunday commented: "It's being said that the correction of the strong yen is largely completed. If the yen keeps on weakening a lot more, it will have a negative impact on peoples' lives." That suggests the government may now be switching its concern to what would happen if the yen continues to weaken. USD/JPY upside is also limited by Japan exporter sales. Daily chart is still positive-biased as MACD is bullish; stochastics is staying elevated at overbought; 5- and 15-day moving averages are rising.
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 102 in view, breach of this target will move further the pair downward and you should expect the second target at 101.83. Pivot point stands at 102.9. 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 103.32 and the second target at 103.7.
Resistance levels:
R1 - 103.32 (Friday's high)
R2 - 103.7
R3 - 104
Support levels:
S1 - 102.00 (this morning's low)
S2 - 101.83 (Thursday's low)
S3 - 101.25 (Tuesday's low)
