Further advance is expected in USD/JPY. The pair is showing strong upward momentum, and is likely to challenge its resistance at 103.15. Meanwhile, the rising 50-period moving average acts as a support, and should continue pushing the prices higher. Besides, a key support base at 102.00 has been formed, and the downside potential should be limited by this level. In addition, the relative strength index is above its neutrality area at 50, and lacks downward momentum.
On Tuesday, US stocks extended their losses while the U.S. dollar strengthened as expectations of the Federal Reserve raising interest rates sooner rather than later grew. The Dow Jones Industrial Average dropped 85 points (-0.5%) to 18,168, the S&P 500 declined 10 points (-0.5%) to 2,150, and the Nasdaq Composite was down 11 points (-0.2%) to 5,289.
Utilities, telecoms and real estate shares led the market to the downside.
Tuesday's decline in stocks followed hawkish comments from Cleveland Fed President Loretta Mester and Richmond Fed President Jeffrey Lacker, who argued in favor of raising interest rates sooner.
To conclude, as long as 102.00 holds on the downside, we expect a new bounce to 103.15 and even to 103.65.
Trading Recommendation: 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 103.15 and the second one at 103.65. In the alternative scenario, short positions are recommended with the first target at 101.60 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 101.25. The pivot point lies at 102.00.
Resistance levels: 103.15, 103.65, 103.95
Support levels: 101.60, 101.25, 100.90
The material has been provided by InstaForex Company - www.instaforex.com