USD/JPY is expected to trade with bullish bias. Overnight, US stock indexes retreated as investors found the latest results of some blue-chip companies disappointing. The Dow Jones Industrial Average dropped 0.6% to 17,982, the S&P 500 lost 0.5% to 2,091, and the Nasdaq Composite was down 2 points to 4,945.
Nymex crude oil declined 2.3% to $43.18 a barrel. In a very volatile session, gold rose 0.4% to $1,248 an ounce (daily high at $1,270), and silver was also up 0.4% to $17.00 an ounce (daily high at $17.70). The benchmark 10-year Treasury yield rose further to 1.870% from 1.850% in the previous session.
The European Central Bank decided to keep interest rates steady, while ECB President Mario Draghi indicated that further rate cuts are possible. Those comments weighed on the euro and EUR/USD finally eased 0.1% to 1.1286 through a session that saw a high of 1.1394.
At the same time, GBP/USD slid 0.1% to 1.4321 (daily high at 1.4439), and USD/JPY was down 0.4% to 109.44. Meanwhile, commodity-linked currencies weakened against the US dollar, with USD/CAD gaining 0.6% to 1.2734, AUD/USD falling 0.7% to 0.7737, and NZD/USD was down 1.0% to 0.6910. The pair reached a high of 109.89 yesterday before entering a consolidation. Currently it is trading below the 20-period (30-minute chart) moving average, which has crossed below the 50-period one, while the intraday relative strength index is placed below the neutrality level of 50. However, the key support at 109.15 has not been breached. In case the pair emerges on the upside upon completing the consolidation, it should re-test the first upside target at 111.05 before challenging the second one at 111.45.
Trading Recommendation:
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. Therefore, long positions are recommended with the first target at 111.05 and the second one, at 111.40. In the alternative scenario, short positions are recommended with the first target at 108.75 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 108.50. The pivot point is at 109.15.
Resistance levels: 111.05, 111.40, 112
Support levels: 108.75, 108.50, 108.10
The material has been provided by InstaForex Company - www.instaforex.com