USD/JPY is under pressure as the key resistance is at 109.30. Overnight, US stocks settled lower, weighed down by bank and financial shares. The Dow Jones Industrial Average fell 1.0% to 17541, the S&P 500 dropped 1.2% to 2041 (back into the red for 2016), and the Nasdaq Composite was down 1.5% to 4848.
Nymex crude oil declined 1.3% to $37.26 a barrel, gold gained 1.5% to $1240 a troy ounce, while the benchmark 10-year Treasury yield eased to 1.689% from 1.753% in the previous session.
Meanwhile, the US dollar saw choppy trading yesterday. USD/JPY plunged another 1.4% to 108.20 (day-low at 107.67), last seen on October 29, 2014. This morning, the pair posted a rebound above 108.50 after Japanese Finance Minister Taro Aso said the government could take necessary measures to deal with the yen's "one-sided" rise.
EUR/USD declined 0.2% to 1.1375 after swinging between 1.1335 and 1.1453. GBP/USD dropped a further 0.5% to 1.4054. And commodities-linked currencies reversed course to the downside, with USD/CAD rising 0.4% to 1.3143, AUD/USD sinking 1.3% to 0.7501 and NZD/USD being down 0.7% to 0.6775. The pair is continuing its rebound off its overnight low of 107.67. Currently it has broken above the 50-period moving average (30-minute chart), while the intraday relative strength index is directed above the neutrality level of 50, indicating that the rebound could be extended. However, as long as the level of 109.30 holds as the key resistance, the intraday outlook remains bearish and the chance of the pair returning to the first downside target at 107.70 (around yesterday's low) remains high. Below 107.70, support would be found at 107.00.
Trading Recommendation:
The pair is trading below its pivot point. It is likely to trade in a lower range as long as it remains below the pivot point. Short positions are recommended with the first target at 108.15. A break of this target will move the pair further downwards to 107.70. The pivot point stands at 109.30. In case the price moves in the opposite direction and bounces back from the support level, it will move above its pivot point. It is likely to move further to the upside. According to that scenario, long positions are recommended with the first target at 109.95 and the second target at 110.50.
Resistance levels: 109.95, 110.50, 111.05
Support levels: 108.15, 107.70, 107
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