USD/JPY is expected to trade with bullish bias. Overnight, US stock indices closed mixed on low trading volumes. The Dow Jones Industrial Average edged up 0.1% to 17,251, while the S&P 500 declined 0.2% to 2015 - dragged by healthcare and materials shares, and the Nasdaq Composite was down 0.5% to 4,728.
Nymex crude oil dropped another 2.3% to $36.34 a barrel, gold was down 0.2% to $1,232 an ounce, while the benchmark 10-year Treasury yield edged down to 1.961% from 1.963% in the previous session.
On the economic data front, retail sales decreased 0.1% month-on-month in February (vs -0.2% expected, -0.4% in January), and the producer price index was down 0.2% (as expected).
Meanwhile, the US dollar maintained its strength against most other major currencies, particularly those commodities-linked ones. EUR/USD was broadly flat at 1.1108, GBP/USD dropped 1.0% to 1.4151, AUD/USD fell 0.8% to 0.7456, and NZD/USD was down 1.1% to 0.6599. And USD/CAD gained 0.7% to 1.3353, closing back above the 200-day moving average. At the same time, USD/JPY lost 0.6% to 113.17.
The pair jumped this morning above both the 20-period (30-minute chart) and 50-period moving averages after Bank of Japan Governor Haruhiko Kuroda said that cutting a short-term interest rate to around minus 0.5% is theoretically possible. The intraday relative strength index is now well directed in the buying area between 50 and 70, suggesting further upside. As long as the bullish bias is maintained, the pair is expected to rise towards the first upside target at 114.15.
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 114.15 and the second one at 114.55. In the alternative scenario, short position is recommended with the first target at 112.60 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 112.15. The pivot point is at 112.95.
Resistance levels: 114.15, 114.55, 115
Support levels: 112.60, 112.15, 111.75