USD/JPY is expected to trade in a higher range. It is underpinned by the positive dollar sentiment (ICE spot dollar index last 95.39 versus 94.32 early Tuesday) after stronger-than-expected 2.2% increase in the US new home sales to the seven-year high of 546,000 in May (versus forecast +1.0% to 522,000). USD/JPY is also supported by the higher US Treasury yields (10-year rose 5.2 bps to 2.414% Tuesday), demand from Japan's importers, the Bank of Japan's ultra-loose monetary policy, and reduced safe-haven appeal of the yen amid diminished risk aversion (VIX fear gauge eased 4.95% to 12.11; S&P 500 closed up 0.06% at 2,124.2 overnight) on the strong US housing data and continued optimism that Greece was nearing a bailout deal with its creditors. But USD sentiment is dented by the bigger-than-expected 1.8% on-month drop in the US May durable goods orders (versus forecast -1.0%), weaker-than-expected Markit US June flash manufacturing PMI of 53.4 (versus forecast 54.0). USD/JPY gains are also tempered by the Japanese exports.

Technical comment:

The daily chart is mixed as the MACD is bearish, but stochastics is bullish at oversold levels.

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 124.60 and the second target at 125. In the alternative scenario, short positions are recommended with the first target at 123.30 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 122.95. The pivot point is at 123.70.

Resistance levels: 124.60 125 125.45

Support levels: 122.30 122.95 122.55