USD/JPY is expected to trade with a bearish bias. US stocks ended slightly higher Friday, paring early gains driven by a 6% surge in oil prices and bullish comments from Federal Reserve officials. The Dow Jones Industrial Average added 0.2% to 17576, the S&P 500 gained 0.3% to 2047, and the Nasdaq Composite was broadly flat at 4850. Energy shares outperformed, while consumer discretionary and health-care shares were laggards.
Nymex crude oil surged 6.6% to $39.72 a barrel, gold rose 0.4% to $1245 a troy ounce, while the benchmark 10-year Treasury yield rose to 1.715% from 1.689% Thursday.
On the forex front, the US dollar weakened further against most major currencies. USD/JPY failed to continue its rebound and edged down 0.2% to 108.03 (day-high at 109.09). EUR/USD gained 0.2% to 1.1399, GBP/USD rose 0.5% to 1.4122, and AUD/USD rebounded 0.7% to 0.7550.
Boosted by a better-than-expected jobs report in Canada and surging oil prices, the Canadian dollar rallied against the greenback, with USD/CAD plunging 1.2% to 1.2986. On Friday, the pair's rebound lost steam and stopped at 109.09, ahead of the key resistance at 109.30. Since then, the pair has drifted downward and is now approaching the first downside target at 107.00. The 20-period (30-minute chart) moving average has crossed below the 50-period one, and the intraday relative strength index is badly directed below the neutrality level of 50. Therefore the intraday outlook remains bearish, and a break below 107.00 could trigger a further decline toward the next support at 106.15.
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 107. A break of this target will move the pair further downwards to 106.15. The pivot point stands at 108.50. 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 109.15 and the second target at 109.95.
Resistance levels: 109.15, 109.95, 110.50
Support levels: 107, 106.15, 105.75
The material has been provided by InstaForex Company - www.instaforex.com