USD/JPY is expected to trade with bearish bias as the key resistance is at 112.30. Last Friday, the US stock indices settled higher again, lifted by shares in banking, health-care, and transportation sectors. The Dow Jones Industrial Average increased 0.7% to 17602, the S&P 500 gained 0.4% to 2049 - joining the DJIA in positive territory for the year, and the Nasdaq Composite was up 0.4% to 4795.
Nymex crude oil declined 1.9% to $39.44 a barrel, gold decreased a further 0.2% to $1,255 an ounce, while the benchmark 10-year Treasury yield dropped further to 1.871% from 1.903% in the previous session.
Meanwhile, the University of Michigan Sentiment Index fell to a five-month low of 90.0 in March (vs 92.2 expected) from 91.7 in February.
On the forex front, the US dollar posted a rebound against most major currencies from a five-month low, with the Wall Street Journal Dollar Index increasing 3% to 86.92. EUR/USD fell 0.4% to 1.1267 and USD/JPY rose 0.2% to 111.55. Commodities-linked currencies also gave up some gains made in the previous sessions, with USD/CAD gaining 0.2% to 1.2999, AUD/USD declining 0.6% to 0.7599, and NZD/USD losing 0.8% to 0.6794. The pair remains on the downside and below the key resistance at 112.30, lacking upward momentum. It is currently trading around the lower Bollinger band as those bands are widening. And the intraday (the 30-minute chart) relative strength index is badly directed within the selling area between 50 and 30. The intraday outlook continues to be bearish and the pair should post choppy price action targeting 111 on the downside first.
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. A break of this target will move the pair further downwards to 110.60. The pivot point stands at 112.30. 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 113.45.
Resistance levels: 113.05, 113.45, 113.80
Support levels: 111, 110.60, 110