Overview:
USD/JPY is expected to trade with risks skewed lower. It is undermined by the selling of yen crosses amid diminished investor risk appetite (VIX fear gauge rose 5.88% to 13.15, S&P 500 closed roughly flat at 1,955.06 Friday) as worries mounted over a possible escalation of the Russia-Ukraine conflict. USD/JPY is also weighed by Japanese export sales and lower U.S. Treasury yields (10-year at 2.341 versus 2.398 late Thursday), the weaker dollar sentiment (ICE spot dollar index last 81.45 versus 81.61 early Friday) on lower-than-expected U.S. July PPI of +0.1% (versus forecast +0.2%), worse-than-expected drop in U.S. Empire State's business conditions index to 14.69 in August from 25.60 in July (versus forecast 20.0), weaker-than-expected University of Michigan preliminary U.S. August consumer sentiment index of 79.2 (versus forecast 82.0). But the USD sentiment is soothed by the higher-than-expected 0.4% rise in U.S. July industrial production (versus forecast +0.2%) and capacity utilization of 79.2% (versus forecast 79.1%). But USD/JPY losses are also tempered by the demand from Japanese importers.
Technical comment:
The daily chart is mixed as bearish outside-day-range pattern was completed on Friday, but stochastics is neutral.
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 102.75 and the second target at 103. In an alternative scenario, if the price moves below its pivot points, short positions are recommended with the first target at 101.95. A break of this target would push the pair further downwards and one may expect the second target at 101.65. The pivot point is at 102.20.
Resistance levels:
102.75
103
103.25
Support levels:
101.95
101.65
101.40
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