USD/JPY is expected to trade in a higher range. The pair recorded a succession of the higher tops and higher bottoms since Nov 15, and is now accelerating on the upside. The new challenge to its next resistance at 110.6 seems more likely to occur. The upward momentum is further reinforced by its rising 20-period and 50-period moving averages, which play support roles and maintain the upside bias. The relative strength index stands firmly above its neutrality area at 50, and is positively oriented.
The U.S. Labor Department reported that CPI advanced 1.6% on year in October (as expected), the fastest growth since October 2014. It also announced that initial jobless claims dropped 19,000 to 235,000 for the week ended November 12 (vs. 257,000 expected), the lowest level in over 40 years.
In addition, the Commerce Department reported that housing starts jumped 25.5% on month to a seasonally adjusted annual rate of 1.32 million units (vs. 1.16 million units expected), the biggest percentage increase since July 1982.
In a testimony before the Joint Economic Committee of the Senate and the House, Yellen pointed out, "At our meeting earlier this month, the Committee judged that the case for an increase in the target range had continued to strengthen and that such an increase could well become appropriate relatively soon if incoming data provide some further evidence of continued progress toward the Committee's objectives. The evidence we have seen since we met in November is consistent with our expectation of strengthening growth and improving labor markets and inflation moving up, U.S. economic growth appears to have picked up."
Above 109.50, look for further upside with 111.10 and 111.65 as targets.
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 111.10 and the second one at 111.65. In the alternative scenario, short positions are recommended with the first target at 108.65 if the price moves below its pivot point. A break of this target is likely to push the pair further downwards, and one may expect the second target at 107.75. The pivot point lies at 109.50.
Resistance levels: 111.10, 111.65, 112.05
Support levels: 108.65, 107.75, 106.90
The material has been provided by InstaForex Company - www.instaforex.com