FX.co ★ Technical analysis of USD/JPY for July 23, 2014

Overview:

USD/JPY is expected to trade with a bullish bias. It is supported by the positive dollar sentiment (ICE spot dollar index last 80.78 versus 80.56 early Tuesday) as the outlook for the U.S. economy improves after a stronger-than-expected 2.6% increase in U.S. existing home sales to 5.04 million in June (versus forecast of 5 million) as well as rise in Richmond Fed manufacturing index to 7 in July from 4 in June. USD/JPY is also supported by the demand from Japanese importers and reduced safe-haven appeal of yen amid positive risk sentiment (VIX fear gauge eased 4.45% to 12.24; S&P 500 rose 0.5% overnight to close at 1,983.53) on strong U.S. housing data, upbeat corporate earnings, in-line 0.3% on-month rise in U.S. June CPI (slowing from May's 0.4% rise) and lower-than-expected June core CPI of +0.1% (versus +0.2% forecast). It dented fears that the U.S. central bank will lift interest rates sooner than expected, while the geopolitical conflicts in Ukraine and Gaza took a back seat. But USD/JPY gains are tempered by the Japanese export sales and lower U.S. Treasury yields after tame CPI data.

Technical comment:
The daily chart is mixed as MACD is bearish, but stochastics is bullish near the oversold zone.

Trading recommendations:
The pair is trading above its pivot point. It is likely to trade in a higher range as far as it remains above its pivot point. As long as the price is keeping above its pivot point, a long position is recommended with the first target at 101.80 and the second target at 102. In an alternative scenario, if the price moves below its pivot points, short positions are recommended with the first target at 101.05. A break of this target would push the pair further downwards and one may expect the second target at 100.85. The pivot point is at 101.25.

Resistance levels:
101.80
102
102.20

Support levels:
101.05
100.80
100.60