USD/JPY is expected to maintain a downside movement. The pair remains under pressure below its key resistance at 103.80, which should limit the upside attempts. The downward momentum is further reinforced by its descending 50-period moving average, which should push the prices lower. Besides, the relative strength index has clearly reversed down, and is now below its neutrality area at 50.
Federal Reserve of Chicago President Charles Evans commented that the U.S. economy is on a sound footing and raising interest rates in December "could be fine."
Apart from growing expectations of a December rate increase, disappointing corporate results were to blame for the stock market downfall. Alcoa, which kicked off the earnings season, shed 11.4% as the company reported a weaker-than-expected third quarter profit and lowered its full-year 2016 revenue targets. Meanwhile, Illumina dived 24.8% as the company's third-quarter revenue fell short of its guidance.
Shares of commodity producers retreated as the U.S. dollar firmed up. Chipmakers also showed downward momentum.
Hence, as long as 103.80 is not surpassed, the pair is likely to drop to 103.05, if breakout, look for further downsides to 102.80.
Trading Recommendation: 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 103.05. A break below this target will move the pair further downwards to 102.80. The pivot point stands at 103.80. 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 104.00 and the second one at 104.20.
Resistance levels: 104.00, 104.20, 104.50
Support levels: 103.05, 102.80, 102.40
The material has been provided by InstaForex Company - www.instaforex.com