Fundamental overview: USD/JPY is expected to consolidate with bullish bias. It is undermined by softer USD sentiment after surprising drop in the US ISM Chicago PMI to 46.2 in May from 52.3 in April (versus forecast for rise to 53.0). USD/JPY is also weighed by lower US Treasury yields (10-year fell 3.5 bps to 2.095% Friday), diminished investor risk appetite (VIX fear gauge rose 3.98% to 13.84, S&P 500 closed 0.63% lower at 2,107.39 Friday) on weak PMI data, contraction of the US 1Q 2nd estimate GDP annual rate by 0.7% (although beating minus 1.0% forecast), and Japan's exports. But USD sentiment is soothed by the stronger-than-expected May University of Michigan final consumer sentiment index of 90.7 (versus forecast 89.5). USD/JPY downside is also limited by demand from Japanese importers and ultra-loose Bank of Japan's monetary policy.
The daily chart is still positive-biased asthe MACD is bullish, stochastics stays elevated at overbought levels, 5 and 15-day moving averages are advancing.
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 124.80 and the second target at 125.25. In the alternative scenario, short positions are recommended with the first target at 122.85 if the price moves below its pivot points. A break of this target is likely to push the pair further downwards, and one may expect the second target at 122.45. The pivot point is at 123.60.
Resistance levels: 124.80 125.25 125.75
Support levels: 122.85 122.45 121.70