USD/JPY is expected to trade with a bearish bias as the key resistance is at 112.60.Overnight, the US stocks pared great losses seen earlier and ended up higher as oil prices rebounded later in the day. The Dow Jones Industrial Average added 0.3% to 16484, the S&P 500 gained 0.4% to 1929, and the Nasdaq Composite was up 0.9% at 4542.
Nymex crude oil rebounded 0.9% to $32.15 a barrel, gold edged up 0.2% to $1,229 an ounce (day-high at $1253), while the benchmark 10-year Treasury yield remained unchanged at 1.740%.
On the forex front, GBP/USD lost another 0.7% to 1.3924 (day-low at 1.3876), having shed 3.3% or 480 points in 3 sessions. EUR/USD edged down less than 0.1% to 1.1011 (day-low at 1.0955). Meanwhile, boosted by rebounding oil prices, the Canadian dollar rallied against the greenback, with USD/CAD dropping 0.7% to 1.3699 and erasing most of the gains made at the previous session. While continuing on its rebound initiated overnight at the low of 111.03, the pair is striking against the key resistance at 112.60. It has jumped above the 50-period (30-minute chart) moving average. And the Bollinger bands are widening, indicating higher volatility ahead. If the pair remains capped by 112.60, it should return to 111.30 on the downside.
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 111.30. A break of this target will move the pair further downwards to 111.00. The pivot point stands at 112.60. 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 113.05 and the second target at 113.35.
Resistance levels: 113.05, 113.35, 113.65
Support levels: 111.30, 111.00, 110.50