USD/JPY is expected to trade with a bullish bias. The pair emerged to the upside after completing a consolidation phase before taking out the resistances at 106.45 (around the high of July 19) and 108.00. Being supported by the ascending 20-period (30-minute chart) moving average and having formed a bullish channel, it is currently heading toward the immediate resistance at 107.45. The relative strength index is well directed above the neutrality level at 50, suggesting continued upward momentum for the pair. Above 107.45, look for a further bounce toward 108.00 (around the high of June 7). The key support has been raised to 106.45.
Market Commentary:
On Wednesday, US stocks charged higher sending the Dow Jones Industrial Average and the S&P 500 to fresh record closing levels, thanks to positive corporate earnings. Microsoft (MSFT) surged 5.3% and Morgan Stanley (MS) gained 2.1% after posting better-than-expected quarterly results.
The DJIA added 0.2% to 18595, extending its record-setting streak to the seventh straight session and its winning streak to the ninth, the longest such streak since March 2013. The S&P 500 rose 0.4% to 2173, and the Nasdaq Composite jumped 1.1% to 5089.
European stocks also rallied, with the STOXX Europe 600 increasing 1.0%. Germany's DAX surged 1.6%, while the UK's FTSE 100 was up 0.5%.
US government bonds reversed to the downside lifting the benchmark 10-year Treasury yield to 1.582% from 1.558% in the prior session. Gold pulled back on the strength of the US dollar, losing 1.0% to $1316 an ounce. Silver plunged 2.5% to $19.39 an ounce, tallying a loss of 4.7%, or $0.95, an ounce in a five-session losing streak. Meanwhile, Nymex crude oil rebounded 0.7% to $44.94 a barrel.
On the forex front, the US dollar pushed higher against other major currencies. EUR/USD broke the key psychological level of 1.1000 and ran down to 1.0979 before settling at 1.1013, down 0.1% day on the day. USD/JPY rose 0.7% to 106.82. On the other hand, GBP/USD rebounded 0.8% to 1.3208. As a result, the ICE Dollar Index edged up to 97.20 from 97.05 Tuesday, holding its four-month high.
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 107.45 and the second one, at 108.00. In the alternative scenario, short positions are recommended with the first target at 105.80, 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 105.25. The pivot point is at 106.45.
Resistance levels: 107.45, 108, 108.50
Support levels: 105.80, 105.25, 104.60
The material has been provided by InstaForex Company - www.instaforex.com