Fundamental outlook:
USD/JPY is expected to trade in lower range. It is undermined by the positive yen sentiment after Koichi Hamada, the adviser to Japanese PM Abe, said the dollar's current level at Y120 is too weak for the yen considering purchasing parity. USD/JPY is also weighed by the flows to haven JPY and unwinding of JPY-funded carry trades amid increased risk aversion (VIX fear gauge rose 10.81% to 13.94, S&P 500 closed 0.46% lower at 2,092.43 overnight) as weak China's trade data for March raised concerns over the global growth, lower US Treasury yields (2-year at 0.536% versus 0.564% late Friday), and Japan export sales. But USD/JPY losses are tempered by the demand from Japan importers, ultra-loose Bank of Japan's monetary policy, and broadly firm dollar undertone (ICE spot dollar index last 99.50 versus 99.28 early Monday) amid expectations that the Federal Reserve would stay on track to raise interest rates this year despite the recent disappointing data on the US economy.
Technical comment:
The daily chart is mixed as the MACD is bullish, 5 and 15-day moving averages are advancing, but bearish outside-day-range pattern was completed on Monday, stochastic is turning bearish at overbought levels.
Trading recommendations:
The pair is trading below its pivot point. It is likely to trade in a lower range as far as it remains below the pivot point. Short positions are recommended with the first target at 119.40. A break of that target will move the pair further downwards to 119.20. The pivot point stands at 120.40. In case the price moves in the opposite direction and bounces back from the support level, it will move above its pivot point. It is likely to move further to the upside. According to that scenario, long positions are recommended with the first target at 120.80 and the second target at 121.20.
Resistance levels:
120.80
121.20
121.65
Support levels:
119.40
119.20
119
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