26.06.201418:03 Forex Analysis & Reviews: Technical analysis of USD/JPY for June 26, 2014

Long-term review

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Overview:

USD/JPY is expected to trade lower after hitting two-week low at 101.62 on Wednesday. It is undermined by the negative dollar sentiment (ICE spot dollar index last 80.20 versus 80.32 early Wednesday) and lower U.S. Treasury yields after larger-than-expected downward revision in final U.S. 1Q GDP to annualized -2.9% (versus forecast -2.0%) from previous estimate of -1.0% and surprise 1.0% on-month drop in U.S. May durable goods orders (versus forecast for no change). USD/JPY is also weighed by Japan's export sales. But USD/JPY losses are tempered by the demand from the Japanese importers and yen-funded carry trades amid positive risk sentiment (VIX fear gauge eased 4.45% to 11.59; S&P 500 rose 0.49% overnight) as investors looked at the 1Q GDP report as a backward-looking indicator, preferring to focus on more recent 2Q data pointing to an improving economy indeed, the Markit flash U.S. services PMI rose to 61.2 in June from 58.1 in May. The services PMI combined with the strong Markit manufacturing PMI which was released on Monday indicate that business activity is growing at the strongest pace seen since prior to the financial crisis.

Technical comment:
Daily chart is mixed as MACD and stochastics are in bearish mode, but five-day moving average is meandering sideways.

Trading recommendation:
The pair is trading below its pivot point. It is likely to trade in a lower range as far as it remains below its pivot point. Short position is recommended with the first target at 101.45. A breach of this target will move the pair further downwards to 101.30. The pivot point stands at 101.80. In case the price moves in the opposite direction and bounces back from the support level, and then it moves above its pivot point. It is likely to move further to the upside. In that scenario, a long position is recommended with the first target at 102 and the second target at 102.15.

Resistance levels:
102
102.15
102.30

Support levels:
101.45
101.30
101.15

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