USD/JPY is expected to continue its upside movement. The pair remains in a consolidation phase, which started after the price reached a day-high of 105.93 yesterday. Currently, it is seeking support from the ascending 50-period (30-minute chart) moving average. The intraday relative strength index is below the neutrality level of 50, indicating that the consolidation phase may extend for a while. However, as long as key support at 105 is not breached, the intraday outlook remains bullish, and the pair should re-test immediate resistance at 106.60. Above 106.60, look for a bounce toward 107.00.
Market Commentary:
On Thursday, the Dow Jones Industrial Average and the S&P 500 continued to chalk all-time-high closing levels. Financial shares led all sectors - except utilities, which finished in the red - to charge higher. Investors were cheered up by the better-than-expected second-quarter earnings released by JPMorgan (JPM), the first among banks to report quarterly results. The DJIA rose 0.7% to 18506, the S&P 500 gained 0.5% to 2163, and the Nasdaq Composite was up 0.6% to 5034.
To the surprise of investors, who widely expected the Bank of England would lower its key interest rate to 0.25% from 0.50%, the central bank decided to keep interest rates unchanged. Instead, it said, stimulatory measures would be determined in August.
European stocks turned positive, as the STOXX Europe 600 advanced 0.8%. Germany's DAX rose 1.4% but the UK's FTSE 100 was down 0.2%.
The benchmark US 10-year Treasury yield climbed to 1.529% from 1.468% in the prior session.
Nymex crude oil rebounded 2.1% to $45.68 a barrel. Gold lost 0.6% to settle at $1335 an ounce (day-low at $1320), and silver declined 0.4% to $20.26 an ounce (day-low at $19.98).
The British pound rocketed to 1.3470 against the US dollar from 1.3211 the moment the Bank of England announced its decision to hold rates steady. GBP/USD then trimmed its gains and settled at 1.3338, up 1.5% on day. Meanwhile, GBP/JPY surged 2.3% to 140.52.
USD/JPY jumped 0.8% to 105.32. At one point, the pair marked a day-high of 105.93, near the closing level of 106.13 seen just before the Brexit vote last month. At the same time, EUR/USD stepped up 0.3% to 1.1118 (day-high at 1.1164).
Regarding commodities-linked currencies, the Canadian dollar strengthened against the greenback for the third day in a row, with USD/CAD falling another 0.7% to 1.2890. In contrast, the New Zealand dollar continued to exhibit weakness, plunging 1.1% to 0.7192 against the US dollar.
Recommendations:
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 106.60 and the second one, at 107.00. In the alternative scenario, short positions are recommended with the first target at 104.15 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 103.90. The pivot point is at 105.00.
Resistance levels: 106.60, 107.00, 107.45
Support levels: 104.15, 103.90, 103
The material has been provided by InstaForex Company - www.instaforex.com