USD/JPY is expected to extend its downside movement. The pair has clearly reversed down following the bearish breakout of its previous horizontal support at 115.60, which is now playing a resistance role. A bearish cross has been identified between the 20-period and 50-period moving averages. The relative strength index remains on the downside.
U.S. government bonds sank further as rallying oil prices lifted inflation expectations. The benchmark 10-year Treasury yield popped above the 2.500% threshold before settling at 2.478%, its highest closing level since June 26, 2015, up from 2.462% Friday.
The U.S. dollar reversed course to the downside after rising for two days as investors held a wait-and-see mood ahead of the Federal Reserve's two-day policy meeting. The ICE U.S. Dollar Index gave up all gains made on Friday as it slipped 0.6% to 101.03.
Hence, as long as 115.60 is not surpassed, look for a new decline to 114.60 and 114.30 in extension.
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 114.60. A break below this target will move the pair further downwards to 114.30. The pivot point stands at 115.60. In case the price moves in the opposite direction and bounces back from the support level, it will go 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 116.15 and the second one at 116.50.
Resistance levels: 116.15, 116.50, 117.00
Support levels: 114.60, 114.30, 113.90
The material has been provided by InstaForex Company - www.instaforex.com