USD/JPY is expected to re-test the 112.90 level. Overnight, US stocks ended lower, dragged by declining energy shares amid a sharp drop in oil prices. The Dow Jones Industrial Average dropped 0.5% to 17502, the S&P 500 fell 0.6% to 2036, and the Nasdaq Composite was down 1.1% at 4768. Nymex crude oil plunged 4.0% to $39.79 a barrel.
Gold lost 2.3% to $1220 an ounce, while the benchmark 10-year Treasury yield dropped to 1.873% from 1.935% in the previous session.
Meanwhile, the US dollar continued to strengthen against most major currencies as US Federal Reserve officials kept giving upbeat comments pointing to an interest rate increase in April. EUR/USD declined 0.3% to 1.1183 and GBP/USD lost another 0.6% to 1.4115. Commodities-linked currencies were also hit hard by oil prices' sharp fall. USD/CAD surged 1.2% to 1.3203, AUD/USD plunged 1.2% to 0.7528 and NZD/USD was down 0.8% to 0.6700.The pair ran up to 112.90 overnight before entering a consolidation, which extended to levels around 112.10. Currently, the pair has staged a rebound and broken above both the 20-period (30-minute chart) and 50-period moving averages. The intraday relative strength index is well directed above the neutrality level at 50 calling for a new upleg. If the pair succeeds in taking the immediate resistance at 112.90 (around yesterday's high), it should rise further toward 113.30 (a key support seen on March 16).
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 112.95 and the second one at 113.30. In the alternative scenario, a short position is recommended with the first target at 111.75 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 110.35. The pivot point is at 112.10.
Resistance levels: 112.90, 113.30, 113.75
Support levels: 111.75, 111.35, 111