Overview:

USD/JPY is expected to trade in a higher range. It is underpinned by the yen-funded carry trades amid positive risk sentiment (VIX fear gauge eased 3.63% to 11.15; S&P 500 hit record high 1,978.58 overnight before closing up 0.67% at 1,973.32) as investor optimism prevails at start of the third quarter. Chinese final PMI data more or less confirm the preliminary improved readings, Japan Q2 Tankan survey of enterprises showed large companies raising their forecast for investment expenditure to +7.4% from +0.1% in the March survey. USD/JPY is also supported by the demand from the Japanese importers and higher U.S. Treasury yields. But USD/JPY gains are tempered by Japan export sales, caution ahead of U.S. non-farm payrolls report Thursday and soft USD sentiment after surprise drop in U.S. ISM manufacturing PMI to 55.3 in June from 55.4 in May (versus forecast for rise to 55.9), weaker-than-expected 0.1% increase in U.S. May construction spending (versus +0.5% forecast) and drop in U.S. IBD/TIPP Economic Optimism Index to 45.6 in July from 47.7 in June.

Technical comment:
Daily chart is mixed as MACD is bearish, five- and 15-day moving averages are declining, but stochastics is turning bullish at oversold zone.

Trading recommendation:
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 far as the price is above its pivot point, a long position is recommended with the first target at 102 and the second target at 102.35. In an alternative scenario, if the price moves below its pivot points, short positions are recommended with the first target at 101.35. A breach of this target would push the pair further downwards and one may expect the second target at 101.15. The pivot point is at 101.50.

Resistance levels:
102
102.15
102.35

Support levels:
101.35
101.15
101