USD/JPY is expected to trade in a lower range. Overnight, U.S. stocks managed to post gains after a volatile session amid a rally in energy and materials shares driven by a surge in oil prices. Nymex crude oil rebounded 8.0% to $32.28 a barrel. The Dow Jones Industrial Average gained 1.1% to 16,336, the S&P 500 added 0.5% to 1,912, while the Nasdaq Composite was down 0.3% to 4,504.
Gold rose 1.2% to $1,142 an ounce, while the benchmark 10-year Treasury yield edged up to 1.881% from 1.864% in the previous session.
The U.S. dollar tumbled against most other major currencies as hopes for the U.S. Federal Reserve to raise interest rates again in March faded. First, the ISM non-manufacturing index fell to 53.5 in January, the lowest since February 2014, from 55.8 in December. Moreover, William Dudley, the president of the Federal Reserve Bank of New York, pointed out that a rate decision should take into account the current tight financial conditions and weakening global economic outlook. EUR/USD surged 1.7% to 1.1103, USD/JPY slumped 1.7% to 117.88, GBP/USD gained 1.3% to 1.4599, while USD/CAD plunged 1.9% to 1.3779; and AUD/USD was up 1.8% to 0.7167. Following the confirmation of a "Round Top" bearish reversal pattern, the pair slumped overnight to as low as 117.01 before posting a rebound. Currently, it is trading around the descending 20-period (30-minute chart) moving average, which stands below the 50-period one. The intraday relative strength index is still trapped within the selling area between 50 and 30. A break below the first downside target at 116.70 would trigger a further decline towards 116.20.
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 116.70. A break of that target will move the pair further downwards to 116.20. The pivot point stands at 118.50. 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 119.60 and the second target at 120.
Resistance levels: 119.60, 120, 120.55
Support levels: 116.70, 116.20, 115.75