USD/JPY is expected to trade in a lower range. Overnight, the US stocks resumed their slide losing over 2%. Consumer discretionary and health care shares declined. The Dow Jones Industrial Average dropped 2.2% to 16151, the S&P 500 lost 2.5% to 1890, while the Nasdaq Composite was down 3.4% to 4526.
Nymex crude oil edged up 4 cents to close at $30.48 a barrel, gold rose 0.6% to $1093 an ounce, while the benchmark 10-year Treasury yield declined further to 2.07% from 2.100% at the previous session.
Meanwhile, the US dollar pared most of its gains against the euro and the yen. EUR/USD increased 0.2% to 1.0873 (day low at 1.0803), and USD/JPY edged up to 117.66 (day high at 118.37) from 117.62. On the other hand, the greenback remained firm against commodity-related currencies with USD/CAD rising another 0.5% to 1.4337 and AUD/USD falling 0.4% to 0.6954. Though the pair broke above the previous key resistance at 118.05, it could only run up to 118.38 before starting its descent. It is currently trading around the lower Bollinger band, while the 20-period (30-minute chart) has crossed below the 50-period one. And the intraday relative strength index is around the over-sold level of 30. The first downside target at 117.20 (a base seen in January 11-12) is in sight, and the break-below of this level could call for a further decline toward 116.75.
Trading recommendations:
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 117.20. A break of that target will move the pair further downwards to 116.75. The pivot point stands at 118.05. 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 118.35 and the second target at 118.60.
Resistance levels: 118.35, 118.60, 119
Support levels: 117.20, 116.75, 116.10
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