USD/JPY is expected to trade in a higher range as bias remains bullish. US indexes closed higher on Friday led by shares in the technology hardware and equipment ( 1.23%), materials ( 1.18%), and utilities ( 1.17%) sectors. The Dow Jones Industrial Average added 0.4% to 17,006.8, the S&P 500 rose 0.3% to 1,999.9, and the Nasdaq Composite gained 0.2% to 4,717.0.
On the economic data front, the US trade deficit in January grew 2.2% to $45.7 billion, exceeding forecasts of $44 billion, from a revised $44.7 billion (larger than previously estimated). In other news, non-farm payrolls grew in February, reaching 242,000 (estimated 195,000), up from a rise of 172,000 in January. The number of non-farm payrolls in the manufacturing industry in February fell by 16,000 (estimated -1,000) from a rise of 23,000 in January. Finally, unemployment rate in February remained unchanged at 4.9%, in line with an estimated figure.
Nymex crude oil rose 3.9% to $35.92 a barrel, while gold dropped 0.45% to $1,258.93 a troy ounce. The yield on the 10-year Treasury note rose to 1.883% from 1.830% previously, and the US dollar went down against major currencies after the jobs report. The pair has been moving sideways above its support base at 113.20, and remains on the upside of its 20-period and 50-period moving averages. Meanwhile, the relative strength of the index is around 50, but lacks downward momentum. Even though a continuation of the consolidation cannot be ruled out, its extent should be limited. Further upside is therefore expected with the next horizontal resistance and overlap set at 114.25 at first. A break above this level would call for further advance towards 114.55 in extension.
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 114.25 and the second one at 114.55. In the alternative scenario, short positions are recommended with the first target at 112.85 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 112.50. The pivot point is at 113.20.
Resistance levels: 114.25, 114.55, 114.85
Support levels: 112.85, 112.50, 112.15