USD/JPY is expected to extend its upside movement. The pair continued to trade on the upside though it is off its recent high at around 105.00. Intraday (30-minute chart) technical indicators are still positively oriented (the 20-period moving average stands far above the 50-period one, the relative strength index remains above 50), helping to maintain the bullish intraday outlook. A test of the first upside target at 105.30 is expected. And above this level, further resistance would be found at 106.10 and 106.85, levels that were seen just before the Brexit vote. Key support is located at 103.60.
Market Commentary :
On Tuesday, US stocks extended gains bringing the Dow Jones Industrial Average and the S&P 500 to all-time-high closing levels. Energy, materials and technology shares were market leaders.
The DJIA rose 0.7% to 18347, above its previous closing record of 18312 set in May 2015, while the S&P 500 also climbed 0.7% to 2152, a new high for the second day in a row. And the Nasdaq Composite was up 0.7% to 5022, stepping in the positive territory for the first time in 2016.
European stocks were also positive, with the Stoxx Europe 600 rising 1.1%.
As global stock markets gained ground along with an improvement in risk sentiment, government bonds in the US and Europe experienced a selloff. The benchmark US 10-year Treasury yield rose to 1.512% from 1.434% Monday (and 1.366% Friday), marking the biggest two-day increase since December 2015.
Nymex crude oil soared 4.6% to $46.80 as the Organization of the Petroleum Exporting Countries (OPEC) projected a more-than-expected decline in oil production by non-member countries. Meanwhile, as investors jumped ship to riskier assets from safe-haven ones, gold dropped 1.7% to $1,331 an ounce, and silver was down 0.7% to $20.12 an ounce.
In forex trading, the Japanese yen continued to slump against the US dollar as expectations of Japan's Prime Minister Shinzo Abe launching new stimulus measures remained high, and investors' risk appetite grew. USD/JPY gained 1.9% to 104.69, having surged 4.1% in two sessions, the biggest two-day increase since November 2014.
Cheering the confirmation of the Conservative Party's Theresa May as Britain's next prime minister, which helped to ease political tensions, the British pound surged 1.9% or 249 pips to 1.3242. At the same time, GBP/JPY soared 3.8% to 138.64. Meanwhile, Bank of England Governor Mark Carney signaled when testifying in Parliament that he is comfortable with the pound's recent sharp depreciation, which could shrink the country's current-account deficit.
EUR/USD was broadly flat at 1.1057, although it reached as high as 1.1125 in the session. As a result, EUR/GBP plunged 1.9% to 0.8358.
Commodities-linked currencies were broadly higher, with USD/CAD falling 0.5% to 1.3041 (day-low at 1.2978), AUD/USD surging 1.2% to 0.7621 (day-high at 0.7657), and NZD/USD rising 1.1% to 0.7295 (day-high at 0.7323).
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 105.30 and the second one, at 106.10. In the alternative scenario, short positions are recommended with the first target at 102.85 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 102.45. The pivot point is at 103.60.
Resistance levels: 105.30, 106.10, 106.75
Support levels: 102.85, 102.45, 101.85
The material has been provided by InstaForex Company - www.instaforex.com