USD/JPY: Under pressure

Overview:
USD/JPY is consolidating after hitting four-and-a-half year high of 103.74 on Wednesday. The rate is underpinned by positive USD sentiment after Federal Reserve Chairman Bernanke said the Fed could begin tapering its bond-buying program in the “next few meetings” if the U.S. economy improved, and minutes from the April 30-May 1 FOMC meeting showing a “number” of officials were ready to reduce purchases as soon as June, although no consensus was reached. 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–BOJ Wednesday left its monetary policy unchanged, keeping intact an unprecedented asset-purchase program. But USD/JPY upside is limited by unwinding of JPY-funded carry trades amid increased risk aversion as U.S. stocks retreated sharply from fresh record highs (S&P closed down 0.83% at 1655.35 overnight after peaking at 1687.18) on hawkish FOMC minutes; Japan exporter sales. Daily chart is still positive-biased as MACD is bullish, stochastics is staying elevated 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 102.3 and the second target at 102.5. You should keep in view short position below the pivot keep of the first target at 100.8, breach of this target will move the pair downward further and expect the second target at 100.54. The pivot point stands at 102. 

Resistance Levels:
R1 – 102.3
R2 – 102.5
R3 – 103

Support Levels:
S1 – 100.8
S2 – 100.54 (May 10 low)
S3 – 99.95 (previous cap set April 11).  

The material has been provided by InstaForex Company – www.instaforex.com