USD/JPY is expected to trade with bearish bias. The pair is trading below its key horizontal resistance at 101.10, and is likely to test its next support at 100.05. At the same time, the relative strength index is below its neutrality area at 50, and lacks upward momentum.
The New York-based Conference Board's consumer confidence index rose to a 9-year high of 104.1 in September (vs. 99 expected) from 101.8 in August.
Government bonds remained in demand as persistent concerns over the financial health of Germany's Deutsche Bank drove investors to relatively safer assets. The benchmark 10-year U.S. Treasury yield dropped further to 1.556% from 1.589% on Monday. At the same time, the 10-year German bond yield closed at negative 0.14% and the 10-year Japanese government bond yield settled at negative 0.07%.
In which case, as long as 101.10 holds on the upside, we expect further downsides to 100.05, and even to 99.60 as possible. Alternatively, above 101.10, look for a new rise with 101.60 and 102.05 as targets.
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 100.05. A break below this target will move the pair further downwards to 99.60. The pivot point stands at 101.10. 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 101.60 and the second one at 102.05.
Resistance levels: 101.60, 102.05, 102.35
Support levels: 100.05, 99.60, 99.20
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