Fundamental outlook:
USD/JPY is expected to trade in a range. Liquidity is thin in Asia today as financial markets in several Asian countries are shut for a public holiday. USD/JPY is underpinned by the improved dollar sentiment after fewer-than-expected 262,000 U.S. jobless claims in week ended April 25 (versus forecast 288,000), bigger-than-expected 0.7% increase in U.S. 1Q employment cost index (versus forecast +0.6%) as well as stronger-than-expected U.S. April ISM Chicago PMI of 52.3 (versus forecast 50.0). USD/JPY is also supported by the higher U.S. Treasury yields (2-year at 0.574% versus 0.567% late Wednesday), demand from Japan's importers, and ultra-loose Bank of Japan's monetary policy. But USD/JPY upside is limited by the flows to haven JPY amid decreased investor risk appetite (VIX fear gauge rose 8.66% to 14.55, S&P 500 closed 1.01% lower at 2,085.51 overnight) after no change in U.S. March personal income from the prior month (versus forecast +0.2%) and weaker-than-expected 0.4% increase in U.S. March personal spending (versus forecast +0.5%), Japan's export sales, and positions adjustment ahead of Japan's long weekend (financial markets in Japan are closed for a holiday on Monday).
Technical comment:
The daily chart is mixed as MACD is bearish; but stochastics is turned bullish near oversold levels. The bullish parabolic stop-and-reverse signal was hit on Thursday.
Trading recommendations:
The pair is trading above its pivot point. It is likely to trade in a wider range as long as it remains above its pivot point. As long as the price holds above its pivot point, long positions are recommended with the first target at 120.10 and the second target at 120.50. In the alternative scenario, if the price moves below its pivot points, short positions are recommended with the first target at 181.75. A break of this target is likely to push the pair further downwards, and one may expect the second target at 118.30. The pivot point is at 119.20.
Resistance levels:
120.10
120.50
121
Support levels:
118.75
118.30
117.80
