USD/JPY is expected to continue its downside movement. The pair recorded a succession of lower tops and lower bottoms since August 9, which confirms a negative view. The descending 50-period moving average is playing a resistance role and maintains the downside bias. The relative strength index is below its neutrality area at 50 and lacks upward momentum. The benchmark 10-year U.S. Treasury yield declined further to 1.509% from 1.548% Tuesday. With a weaker U.S. dollar, gold surged up to $1357 an ounce before closing at $1346, up 0.4% on day. Silver gained over 3% to $20.49 an ounce and settled at $20.06, up 1.1% on day.
The U.S. dollar experienced broad-based selling with the ICE U.S. Dollar Index falling 0.6% to 95.60. The index has given back all gains generated by last Friday's robust July jobs report and is now below its 200-day moving average. As long as 101.70 holds on the upside, the pair is likely to drop to 100.95. A break below this level would open the way to further weakness toward the horizontal support at 100.65.
Trading Recommendation:
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 100.95. A break below this target will move the pair further downwards to 100.65. The pivot point stands at 101.70. 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 102.00 and the second one at 102.30.
Resistance levels: 102.00 , 102.30, 102.85
Support levels: 100.95, 100.65, 100.15
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