USD/JPY: Under pressure

Overview:
USD/JPY is trading in lower range. USD/JPY rebounded strongly from 100.96 on Tuesday after Nikkei ground 1.2% higher, and extended its gains to as high as 102.51 overnight. The rate is underpinned by positive dollar sentiment on rise in U.S. Conference Board’s consumer confidence index to five-year high of 76.2 in May (vs 72.0 forecast) from revised 69.0 in April (initially reported as 68.1); 10.9% on-year rise in U.S. S&P/Case-Shiller 20-city home price index in March (vs +10.3% forecast) for largest gain in seven years; rise in Richmond Fed’s manufacturing current business conditions index to minus 2 in May from minus 6 in April; rise in Dallas Fed’s general business activity index to minus 10.5 in May from minus 15.6 in April. USD/JPY also supported by demand from Japan importers and investment trusts; widening USD-JPY interest rate differential–Fed Chairman Bernanke had indicated last week that the Fed could begin winding down its purchases during the central bank’s next few meetings if data show a continuing economic recovery. But USD/JPY gains tempered by Japan exporter sales; rising Japanese government bond yields: 10-year yield finished higher at 0.905% Tuesday compared with 0.83% on Monday, raising concerns that BOJ’s latest easing program is not having its intended effects. Daily chart is still negative-biased as MACD and stochastics are in bearish mode; five-day moving average is staging bearish crossover against 15-day MA. 

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 100.85 in view, breach of this target will move further the pair downward and you should expect the second target at 100.55. Pivot point stands at 101.85. 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 102.2 and the second target at 102.55.   

Resistance levels:
R1 – 102.20
R2 – 102.55
R3 – 102.85

Support levels:
S1 – 100.85
S2 – 100.55
S3 – 100.2

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