USD/JPY is expected to trade in a higher range. The pair is still trading in a bullish channel, which emerged on December 8. Besides, the ascending 20-period and 50-period moving averages play strong support roles, and should push the prices higher.
The University of Michigan sentiment index (preliminary reading) improved to 98.0 in December (vs. 94.5 expected), the highest level since January 2015, from 93.8 in November. U.S. government bonds pulled backed sharply as investors closely watched a slate of bond auctions this week -- both sales of three-year notes and 10-year notes scheduled for Monday, a 30-year bond auction Tuesday. The benchmark 10-year Treasury yield rose to 2.462% from 2.391% Thursday. The U.S. dollar posted gains for the second day with the ICE U.S. Dollar Index adding 0.5% to 101.59. CME Group data showed that investors assigned a 97% probability of the Federal Reserve raising interest rates at its December 14 meeting.
Hence, as long as 114.85 is support, a new challenge of the next horizontal resistance at 116.05 seems more likely to occur, if breakout, look for a further advance towards 116.50 as possible.
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 116.05 and the second one at 116.50. In the alternative scenario, short positions are recommended with the first target at 114.30 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 113.90. The pivot point lies at 114.85.
Resistance levels: 116.05, 116.50, 117.00
Support levels: 114.30, 113.90, 113.65
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