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Technical analysis of USD/JPY for May 17, 2016


USD/JPY pair is supported by a rising trend line. Overnight US stock indices rebounded, paring losses made in the previous session. Investors were cheered up by rising oil prices, multi-billion dollar merger-and-acquisition deals in the pharmaceutical and energy sectors, as well as Berkshire Hathaway's reported $1 billion stake in Apple Inc. (AAPL). The Dow Jones Industrial Average rallied 1.0% to 17,710, the S&P 500 gained 1.0% to 2,066, and the Nasdaq Composite was up 1.2% to 4,775.

Nymex crude oil surged 3.3% lower to a year-to-date high at $47.72 a barrel. Goldman Sachs, which has recently been among the most bearish banks on oil prices, said it now expects oil prices to rise to $50 a barrel in the second half of the year, compared with its previous projection of $40-45, citing a supply shortfall caused by recent outages.

Gold was broadly flat at $1,273 an ounce although it had reached $1,288 in the session. And the benchmark 10-year Treasury yield climbed to 1.751% from 1.705% in the previous session.

On the economic data front, the US Empire State Manufacturing Survey posted -9.02 in May (vs. +6.50 expected, +9.56 in April).

Regarding forex trading, the US dollar softened after rallying for 2 sessions. EUR/USD edged up 0.1% to 1.1316 (daily high at 1.1342) and GBP/USD rebounded 0.2% to 1.4396.

Commodity currencies also enjoyed a boost generated by stronger oil prices. USD/CAD slid 0.4% to 1.2893, AUD/USD rebounded 0.3% to 0.7287, and NZD/USD was up 0.4% to 0.6788 (but still below its 200-day moving average).

The pair has managed to trade above the key support at 108.20. Currently it is riding on a rising trend line while being supported by the ascending 50-period (30-minute chart) moving average. The intraday outlook remains bullish and the pair is expected to re-test the immediate resistance at 109.90 before rising further to 110.50.

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 109.90 and the second one, at 110.50. In the alternative scenario, short positions are recommended with the first target at 108.20 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 107.40. The pivot point is at 108.65.

Resistance levels: 109.90, 110.50, 110.95

Support levels: 108.20, 107.40, 107

The material has been provided by InstaForex Company -