USD/JPY is expected to trade in a lower range as the key resistance is at 113.05.Overnight U.S. stocks settled higher, cheered by the Federal Reserve's dovish rate outlook. Commodities and energy shares were also boosted by a surge in oil prices. The Dow Jones Industrial Average rose 0.4% to 17325, the S&P 500 increased 0.6% to 2027, and the Nasdaq Composite was up 0.8% to 4763.
Nymex crude oil surged 5.8% to $38.46 a barrel, gold gained 2.5% to $1262 an ounce, while the benchmark 10-year Treasury yield declined to 1.940% from 1.961% in the previous session.
The Federal Reserve, as expected, kept interest rates unchanged while projecting two more quarter-point interest rate increases by the end of 2016, down from four as projected in December.
As a result, the U.S. dollar fell broadly against most other major currencies, with the WSJ Dollar Index losing 0.8% to 87.76, the lowest level since October. EUR/USD gained 1.0% to 1.1222, GBP/USD rose 0.8% to 1.4257, USD/JPY declined 0.5% to 112.57, while AUD/USD was up 1.2% to 0.7548. With an additional boost from rising oil prices, the Canadian dollar surged against the greenback, with USD/CAD plunging 1.9% to 1.3095 and closing below the 200-day moving average again. The pair plunged to 112.29 overnight before posting a rebound. Currently it remains capped by the key resistance at 113.05. And the bearish bias is also maintained by the descending 20-period (30-minute chart), which has crossed below the 50-period one. Meanwhile the intraday relative strength index remains below the neutrality level at 50. As long as 113.05 is not surpassed, the pair should return to the first downside target at 111.85 and decline further toward 111.60.
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 111.85. A break of this target will move the pair further downwards to 111.60. The pivot point stands at 113.05. 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 113.45 and the second target at 113.80.
Resistance levels: 113.45, 113.80, 114.15
Support levels: 111.85, 111.60, 111.05