USD/JPY is expected to trade with bullish bias above 103.30. The pair is consolidating and is trading below its descending 20- and 50-period moving averages. Nevertheless, a support base at 103.30 has formed and the downside attempts should be limited by this level. In addition, the relative strength index lacks downward momentum. Last but not least, even though a continuation of the consolidation cannot be ruled out, its extent should be limited.
On Monday, US stocks drifted lower as weaker oil prices weighed on energy shares, and Amazon and Netflix dragged the consumer discretionary sector. The Dow Jones Industrial Average dropped 51 points (-0.3%) to 18,086, the S&P 500 declined 6 points (-0.3%) to 2,126, and the Nasdaq Composite was down 14 points (-0.3%) to 5,199.
Amazon.com declined 1.2% and Netflix lost 1.6% at close. However, upon releasing its third quarter results and posting stronger-than-expected subscriber growth in the after-market hours, Netflix surged 20%.
On the economic data front, the Federal Reserve reported that industrial production increased 0.1% on month in September (as expected, vs. -0.5% in August). On the other hand, the Federal Reserve Bank of New York said its Empire State headline index fell to a five-month low of -6.8 in October (vs. +1.00 expected) from -2.0 in September.
Meanwhile, Federal Reserve Vice Chairman Stanley Fischer pointed out that the central bank is "very close" to its employment and inflation targets, and reiterated concerns that ultra-low interest rates may leave the US economy vulnerable to shocks. However, he mentioned it was "not that simple" for the Fed to raise rates.
Hence, as long as 103.30 is not broken, expect a new rise to 104.40 at first.
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 104.40 and the second one at 104.65. In the alternative scenario, short positions are recommended with the first target at 103.05 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 102.80. The pivot point lies at 103.30.
Resistance levels: 104.40, 104.65, 105.00
Support levels: 103.05, 102.80, 102.40
The material has been provided by InstaForex Company - www.instaforex.com