USD/JPY is expected to trade with a bearish bias and look for an upside target at 109.45. Overnight, US stock indices settled higher as energy shares rose despite oil producers' failure to reach an output freeze deal. The Dow Jones Industrial Average gained 0.6% to 18004, the S&P 500 rose 0.7% to 2094, and the Nasdaq Composite was up 0.4% at 4960.
Nymex crude oil pared heavy losses seen earlier and settled just 1.4% lower at $39.78 a barrel. Gold declined 0.2% to $1,231 an ounce, while the benchmark 10-year Treasury yield climbed to 1.773% from 1.753% last Friday.
On the forex front, along with oil prices' rally from their lows, the Canadian dollar rebounded against the US dollar, with USD/CAD finally dropping to 1.2780 from a day-high of 1.2990 and from 1.2819 last Friday.
Meanwhile, other commodities-linked currencies also reversed their course and bounced higher, with AUD/USD gaining 0.7% to 0.7749 (day-low at 0.7588) and NZD/USD being up 0.5% (day-low at 0.6841).
The pair continues its rebound initiated yesterday from the low of 107.82. With support provided by the 20-period (30-minute chart) moving average, it is currently trading around the upper Bollinger band, calling for an acceleration to the upside. Also, the intraday relative strength index is well directed near the overbought level of 70 lacking downward momentum. The intraday outlook is very bullish and the pair should approach the immediate resistance at 109.45 before re-testing 109.75 (around the high of April 15).
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 109.45 and the second one, at 109.75. In the alternative scenario, short positions are recommended with the first target at 108.10 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 107.80. The pivot point is at 108.50.
Resistance levels: 109.45, 119.75, 110.10
Support levels: 108.10, 107.80, 107.30
The material has been provided by InstaForex Company - www.instaforex.com