USD/JPY is expected to trade with bearish bias. Overnight US stock indices managed to close with small gains after erasing losses earlier in the session. The Dow Jones Industrial Average added two points to 17,789, the S&P 500 rose 0.1% to 2,099, and the Nasdaq Composite was also up 0.1% to 4,952.
On the economic front, the ISM Manufacturing PMI rose to 51.3 in May (vs 50.3 expected) from 50.8 in April, and the Markit U.S. Manufacturing PMI edged up to 50.7 in May from the preliminary reading of 50.5. On the other hand, U.S. auto sales dropped 6% YoY to 1.54M vehicles in May, mainly due to two fewer selling days in the month.
Meanwhile investors are watching closing ADP employment report tonight and payrolls data tomorrow for clues about the next interest-rate rise by the Federal Reserve.
Nymex crude oil settled down 0.2% at $49.01 a barrel although it once went down to $47.75 in the session. Gold declined 0.2% to $1,212 an ounce, and silver continued showing weakness, being down 0.3% to $15.94 an ounce. The benchmark 10-year U.S. treasury yield edged up to 1.844% from 1.834% in the previous session.
On the forex front, the US dollar slumped against the Japanese yen yesterday as Japanese Prime Minister Shinzo Abe announced a delay of a planned sales-tax increase and called for a fiscal stimulus package to be passed. Investors took those comments as a signal of the Bank of Japan shifting away from monetary easing measures. USD/JPY plunged 1.1% to 109.52 (intraday-low is at 109.03).
The British pound remains under pressure as "Brexit" fears were reignited by recent poll results on Britain's June 23 European Union membership referendum. GBP/USD gave up another 0.4% to settle at 1.4414 yesterday.
And the Australian dollar surged up to 0.7299 against the greenback yesterday (from 0.7179 in the previous day) on Australia's stronger-than-expected Q1 GDP growth (+3.1% YoY vs +2.8% expected, +1.1% QoQ vs +0.8% expected). AUD/USD finally rose 0.4% to 0.7258.
At the same time, EUR/USD firmed up Wednesday, gaining 0.5% to 1.1185, as investors are keeping an eye on the European Central Bank's policy meeting Thursday night while the central bank is expected to maintain its monetary policy unchanged.The pair lost the 110.00 level yesterday before plunging swiftly down to 109.03. Currently, the latest rebound from the low has lost momentum, and the pair is trading below the 20-period (30-minute chart) moving average. The intraday relative strength index remains below the neutrality level of 50 lacking upward momentum. Therefore the intraday outlook continues to be bearish and the pair should return to the first downside target at 108.20. A break below this level would open a path towards the next support at 107.75.
Recommendations: 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 108.20. A break of this target will move the pair further downwards to 107.75. The pivot point stands at 107.70. 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 110.15 and the second one at 110.40.
Resistance levels: 110.15, 110.40, 111
Support levels: 108.20, 107.75, 107.20
The material has been provided by InstaForex Company - www.instaforex.com