USD/JPY is under pressure. Overnight U.S. stocks pared most of the gains made in the previous session as energy and materials were pressured by an over-4% drop in oil prices. The Dow Jones Industrial Average dropped 1.1% to 16,431, the S&P 500 lost 1.3% to 1,921, and the Nasdaq Composite was down 1.5% to 4,503.
Nymex crude oil fell 4.6% to $31.87 a barrel, gold rebounded 1.6% to $1,227 an ounce, while the benchmark 10-year Treasury yield eased to 1.740% from 1.766% in the previous session.
In the foreign exchange market, GBP/USD continued with its slide losing another 0.9% overnight to 1.4022, the lowest level since March 2009. This morning, the pair pushed even below 1.4000 levels. EUR/USD edged down 0.1% to 1.1017. At the same time, USD/JPY fell 0.7% to 112.10, USD/CHF lost 0.9% to 0.9907, and USD/CAD was up 0.6% to 1.3792. The pair emerged on the downside after completing a "broadening formation" pattern yesterday, signaling a prolonged bearish bias. Currently, it is trading below the 20-period (30-minute chart) moving average, which stands below the 50-period one. And the relative strength index remains below the neutrality level of 50 lacking upward momentum. A break below the first downside target at 111.00 would trigger a further decline towards 110.65.
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 111.00. A break of this target will move the pair further downwards to 110.50. The pivot point stands at 112.25. 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 112.70 and the second target at 113.35.
Resistance levels: 113.20, 113.65, 114.15
Support levels: 111.00, 110.50, 110.00