USD/JPY is expected to trade in a higher range as the bias remains bullish. Last Friday, US stocks were mixed while technology shares were weighed down by disappointing results. The Dow Jones Industrial Average edged up 0.1% to 18003, the S&P 500 was broadly flat at 2091, while the Nasdaq Composite dropped 0.8% to 4945.
USD/JPY is expected to trade with a bullish bias as intraday support is at 110.75. Overnight, US stock indices settled slightly lower, dragged down by transportation, energy, and commodity shares. The Dow Jones Industrial Average declined 0.2% to 17977, the S&P 500 also dropped 0.2% to 2087, and the Nasdaq Composite was down 0.2% to 4895.
Nymex crude oil lost 2.5% to settle at $42.64 a barrel, gold gained 0.5% to $1238 an ounce, and the benchmark 10-year Treasury yield rose further to 1.900% from 1.888% in the previous session.
On the forex front, the US dollar weakened against most other major currencies as investors re-positioned ahead of central-bank meetings in the US and Japan this week. The Wall Street Journal Dollar Index declined 0.3% to 86.53.
Following an over-2% surge last Friday, USD/JPY gave back 0.6% to 111.19 yesterday. EUR/USD rebounded 0.3% to 1.1263.
Meanwhile, the British pound continued to strengthen against the US dollar as the "In" camp is gaining an upper hand in the campaign over Britain's membership of the European Union, and US President Barack Obama has voiced his support for Britain to remain in the EU. GBP/USD rose 0.6% to 1.4480 (day-high at 1.4519).
The pair remains in a consolidation while trading above the key support at 110.75 (a key resistance seen last Friday, the breaking of which led to the latest upleg). Currently it is around the overlapping 20- and 50-period (30-minute chart) moving averages. And the intraday relative strength index is around the neutrality level of 50 lacking downward momentum. In case the pair emerges from the consolidation without breaching the key support at 110.75, it should be able to re-visit the first upside target at 111.80 (around yesterday's high).
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 111.35 and the second one, at 111.80. In the alternative scenario, short positions are recommended with the first target at 110.25 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 109.90. The pivot point is at 110.75.
Resistance levels: 111.35, 111.80, 112.45
Support levels: 110.25, 109.90, 109.15
The material has been provided by InstaForex Company - www.instaforex.com