FX.co ★ Technical analysis of USD/JPY for July 25, 2014

Overview:

USD/JPY is expected to trade in a higher range. It is underpinned by the positive dollar sentiment (ICE spot dollar index last 80.86 versus 80.81 early Thursday) as 19,000 drop in U.S. jobless claims to an eight-and-a-half year low of 284,000 in the week ended July 19 (versus 305,000 forecast) and surprise rise in Kansas City Fed's Manufacturing Activity Index to 9 in July from 6 in June (versus the forecast for no change) outweighed by bigger-than-expected 8.1% on-month drop in U.S. new home sales to 406,000 in June (versus forecast of 5.8% drop to 475,000), sharp downward revision of May sales to 442,000 from a previously estimated 504,000 as well as drop in Markit flash U.S. manufacturing PMI to 56.3 in July from 57.3 in June. USD/JPY is also supported by the demand from Japanese importers, higher U.S. Treasury yields; the weaker JPY sentiment after wider-than-expected Japan June trade deficit of Y822.2 billion (versus Y684.7 billion forecast). But USD/JPY gains are tempered by Japanese export sales, lingering geopolitical concerns over Ukraine and Gaza and adjustment of positions before the weekend.

Technical comment:
The daily chart is positive-biased as MACD and stochastics are bullish, a five-day moving average is rising above 15-day MA.

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 102 and the second target at 102.25. 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 101.15. The pivot point is at 100.95.

Resistance levels:
102
102.25
102.45

Support levels:
101.15
100.95
100.60