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Technical analysis of USD/JPY for May 20, 2016

USDJPYM30.png

USD/JPY is expected to trade in a higher range as bias remains bullish. Overnight US stock indices closed lower, although they had bounced back from deeper declines seen earlier in the session. Concerns about the US Federal Reserve raising interest rates again as soon as June deepened as New York Fed President William Dudley and Richmond Fed President Jeffrey Lacker gave hawkish comments.

The Dow Jones Industrial Average slid 0.5% to 17,435, the S&P 500 dropped 0.4% to 2,040, while the Nasdaq Composite was down 0.6% to 4,712. Gains in utilities and consumer staples shares were offset by losses in industrials and financials. Wal-Mart (WMT) rose 9%, its biggest gain since 2008, after posting stronger-than-expected Q1 earnings.

Nymex crude oil edged down 0.1% to $48.16 a barrel (daily low at $46.73). Gold declined another 0.3% to $1,254 an ounce, and silver plunged 2.1% further to $16.48 an ounce. US government bonds stabilized as the benchmark 10-year Treasury yield fell to 1.845% from 1.882% in the previous session.

On the forex front, the US dollar charged higher against major currencies yesterday, but its up-surge lost momentum toward the session's end. EUR/USD dropped 0.1% to 1.1202 (daily low at 1.1178), USD/CHF charged 0.3% higher to another 2-month high of 0.9901. USD/CAD was up 0.5% to 1.3092 while it had surged up to 1.3153 earlier. The pair kept trading yesterday between the immediate resistance at 110.50 and the key support at 109.25, chalking a daily high of 110.38. Currently, it has broken above both the 20- and 50-period (30-minute chart) and is around the upper Bollinger band. Also the intraday relative strength index has surged past the neutrality level of 50. Therefore the intraday outlook remains bullish and the pair is on track to re-test 111 on the upside, above which the next resistance would be found at 111.45.

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 111 and the second one, at 111.45. In the alternative scenario, short positions are recommended with the first target at 109.25 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 108.65. The pivot point is at 109.65.

Resistance levels: 111, 11.45, 111.90

Support levels: 109.25, 108.65, 108.20

The material has been provided by InstaForex Company - www.instaforex.com