USD/JPY is under pressure and expected to persist its downside movement. On Tuesday U.S. stocks halted their recent winning streak which spanned the prior four sessions as fears that Britain's exit from the European Union would drag global growth resurfaced. The Dow Jones Industrial Average fell 0.6% to 17840, the S&P 500 dropped 0.7% to 2088, and the Nasdaq Composite was down 0.8% to 4822. Automobile, bank and energy shares lost the most, while utilities and consumer staples showed gains.
European stocks were broadly weaker, with the Stoxx Europe 600 declining 1.7%. However, the U.K. FTSE 100 gained 0.4%.
Nymex crude oil plunged 4.9% to $46.60 a barrel.
Bank of England said it would let banks free up more funds for lending by lowering the amount of capital reserves they are required to hold. BoE Governor Mark Carney pointed out, "There is the prospect of a material slowing of the economy."
On the economic data front, U.S. factory orders dropped 1.0% month on month in May (vs -0.8% expected) and durable goods orders (final reading) decreased 2.3% in May (vs -2.2% expected).
As investors rushed to safe-haven assets, government bonds received overwhelming buying orders, pushing benchmark 10-year government debt yields in the U.K., Germany, Switzerland, France, Denmark and Sweden down to fresh historic lows. The benchmark U.S. 10-year Treasury yield settled at a record low of 1.367%, down from 1.446% Friday.
Gold also benefited from safe-haven buying as it rose 0.4% to $1356 an ounce. Although silver saw profit-taking and was down 2.0% to $19.91 an ounce yesterday, it rebounded up to $20.41 an ounce this morning.
The British pound chalked a fresh 31-year low against the U.S. dollar at 1.2997 yesterday (prior session close: 1.3289), weighed down by serious concerns on the suspension of trading in three U.K. commercial property funds worth about 10 billion pounds announced by Standard Life, Aviva and Prudential's M&G Investments. This morning GBP/USD slumped down to 1.2928.
The Japanese yen was in demand as USD/JPY fell 0.8% to 101.70. This morning the pair crossed below the 101.00 mark. As a result the ICE U.S. Dollar Index gained 0.5% to 96.16.
At the same time EUR/USD slid 0.7% to 1.1075, USD/CAD surged 1.1% to 1.2978, AUD/USD plunged 1.0% to 0.7458, and NZD/USD retreated 1.0% to 0.7152. The pair has crossed below the 101.00 level while trading around the lower Bollinger band as those bands were widening, suggesting a further acceleration to the downside. The intraday relative strength index is headed below the over-sold level of 30, indicating continued downward momentum for the pair. The present down-leg could bring the pair down to 99.900 and 99.25.
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 99.90. A break below this target will move the pair further downwards to 99.25. The pivot point stands at 101.20. 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 101.90 and the second one, at 102.20.
Resistance levels: 101.90, 102.20, 102.80
Support levels: 99.90, 99.25, 98.55
The material has been provided by InstaForex Company - www.instaforex.com