USD/JPY is expected to trade with bearish bias .The pair remains under pressure below its nearest resistance at 103.10. Even though a continuation of the consolidation cannot be ruled out at the current stage, its extent should be limited. Furthermore, the relative strength index lacks upward momentum. To conclude, a new pullback is more likely to occur to 102.00 and 101.50 in extension, as long as 103.10 holds on the upside.
Market Commentary:
On Monday U.S. stock indexes were modestly lower as slumping oil prices weighed down energy shares. Technology and bio-tech shares posted gains. The Dow Jones Industrial Average slid 27 points to 18404 and the S&P 500 edged down 2 points to 2170, while the Nasdaq Composite advanced 22 points or 0.4% to 5184.
European stocks lacked upward momentum with the STOXX Europe 600 falling 0.6%. Germany's DAX edged down less than 0.1%, the U.K.'s FTSE 100 dropped 0.5%, while France' CAC was down 0.7%.
Nymex crude oil plunged 3.7% to $40.06 a barrel having dipped below $40 for the first time in three months after Saudi Arabia announced a price cut. Gold added 0.2% to $1352 an ounce and silver was up 0.4% to $20.40 an ounce. Meanwhile, the benchmark 10-year U.S. Treasury yield rose to 1.499% from 1.458% on Friday.
On the forex front, the U.S. dollar stabilized after Friday's plunge with the ICE U.S. Dollar Index rebounding 0.2% to 95.71. USD/JPY rose 0.3% to 102.38. GBP/USD retreated 0.4% to 1.3173. EUR/USD dipped 0.1% to 1.1159.
Commodities-linked currencies weakened along with oil and commodities prices. The Canadian dollar fell against the greenback lifting USD/CAD by 0.7% to 1.3121, back above the pair's 200-day moving average. NZD/USD declined 0.4% to 0.7170. At the same time, AUD/USD shed 0.8% to settle at 0.7534.
Expect volatility in the trading of Australian dollar later today when the Reserve Bank of Australia will set interest rates. It is widely expected that the central bank would lower its cash rate target to 1.50% from the current 1.75%.
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 102.40. A break below this target will move the pair further downwards to 102. The pivot point stands at 103.10. If 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 103.95 and the second one at 104.60.
Resistance levels: 103.95, 104.60, 105.50
Support levels: 102.00, 101.50, 101
The material has been provided by InstaForex Company - www.instaforex.com