USD/JPY is expected to trade in a higher range as bias remains bullish. On Tuesday, US stocks rebounded broadly snapping a two-day decline following the UK's vote to leave the European Union. The Dow Jones Industrial Average gained 1.6% to 17,409, the S&P 500 rose 1.8% to 2,036, and the Nasdaq Composite was up 2.1% to 4,691. Energy, financial, and technology shares were top gainers as investors went bargain hunting.
European stocks also turned positive, with the Stoxx Europe 600 climbing 2.6%.
As markets stabilized, safe-haven assets halted their recent rally. The benchmark US 10-year treasury yield edged up to 1.463% from 1.461% Monday, and gold fell 0.9% to $1,312 an ounce. On the other hand, Nymex crude oil surged 3.3% to $47.85 a barrel.
The US dollar lost its upward momentum as investors jumped into riskier assets. The British pound, which suffered a combined 11.2% sell-off in the prior two sessions, rebounded 0.9% to 1.3340 against the greenback. At the same time, EUR/USD gained 0.4% to 1.1065 (daily high at 1.1110), and USD/JPY was up 0.7% to 102.74. As a result, the ICE Dollar Index declined 0.3% to 96.245.
Meanwhile, USD/CHF managed to hold its 200-day moving average by adding 0.4% to close at 0.9820.
Commodity currencies regained strength, with USD/CAD falling 0.4% to 1.3021, AUD/USD rebounding 0.9% to 0.7387 and NZD/USD rising 0.7% to 0.7044. The pair finally broke above the key resistance at 101.85 yesterday turning the intraday outlook bullish. It rose up to 102.84 before entering a consolidation. Currently, it is seeking support at the 50-period (30-minute chart) moving average. In fact, the pair is still riding on a trend line drawn from June 27. As long as the level at 101.85 holds as the key support and the pair finishes the consolidation with a positive tone, a re-visit to the first upside target at 103.30 (level of over-lapping support and resistance seen on June 24) is expected.
Recommendations:
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 103.30 and the second one at 104.25. In the alternative scenario, short positions are recommended with the first target at 101.40 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 100.80. The pivot point is at 101.85.
Resistance levels: 103.30, 104.25, 105.00
Support levels: 101.40, 100.80, 100.00
The material has been provided by InstaForex Company - www.instaforex.com