USD/JPY is under pressure. The pair is accelerating on the downside this morning following yesterday's bearish breakout of its 50-period moving average support. In addition, the 20-period (30-minute chart) moving average also crossed below the 50-period one (a bearish signal). The relative strength index is heading downward, without showing any reversal signal.
Market Commentary:
On Wednesday U.S. stocks ended little changed as they largely did not react to the U.S. Federal Reserve's decision to hold interest rates steady and the following FOMC statement. The Dow Jones Industrial Average edged down 1 point to 18472, the S&P 500 slipped 2 points to 2166, while the Nasdaq Composite added 29 points or 0.6% to 5139. Better-than-expected earnings helped Apple Inc. rise 6.5%.
Traders now widely expect the U.S. central bank to raise interest rates in September at the earliest as it upgraded its assessment of the economy's recent performance and pointed out that "near-term risks to the economic outlook have diminished."
European stocks remained on the upside with the STOXX Europe 600 rising 0.4%. Germany's DAX gained 0.7% while the U.K.'s FTSE 100 was up 0.4%.
U.S. government bonds strengthened pressing the benchmark 10-year Treasury yield to 1.516% from 1.561% on Tuesday. Gold jumped 1.5% to $1,339 an ounce and silver soared 3.7% to $20.34 an ounce. Nymex crude oil steepened its downtrend by dropping another 2.3% to $41.92 a barrel.
On the forex front, the Fed's rather hawkish statement did not help the U.S. dollar much as the currency weakened against other major currencies. EUR/USD rose 0.6% to 1.1055 and GBP/USD was up 0.7% to 1.3220.
The Japanese yen shot up to 106.53 against the U.S. dollar yesterday (previous-day close: 104.64) after Prime Minister Shinzo Abe unveiled a surprisingly huge 28-trillion-yen stimulus package. USD/JPY closed at 105.39, up 0.7% on day. As a result the ICE U.S. Dollar Index declined 0.1% to 97.05. This morning, the greenback continued to soften with USD/JPY crossing below the 105.00 level.
Recommendations:
The pair is trading below its pivot point. It is likely to be traded in a lower range as long as it remains below the pivot point. Short positions are recommended with the first target at 104.50. A break below this target will move the pair further downwards to 103.95. The pivot point stands at 105.45. If 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 105.90 and the second one, at 106.50.
Resistance levels: 105.90, 106.50, 106.75
Support levels: 104.50, 103.95, 103.30
The material has been provided by InstaForex Company - www.instaforex.com