USD/JPY is expected to trade in a lower range with 112.05 in sight. Overnight, US stocks rallied as investors were cheered up by Federal Reserve Chairwoman Janet Yellen, who said the central bank should proceed cautiously when it looks to raise interest rates. The Dow Jones Industrial Average rose 0.6% to 17633, the S&P 500 gained 0.9% to 2055, and the Nasdaq Composite was up 1.7% to 4846.
Nymex crude oil lost another 2.8% to $38.28 a barrel, gold rose 1.7% to $1,242 an ounce, while the benchmark 10-year Treasury yield declined further to 1.814% from 1.870% in the previous session.
Impacted by Yellen's dovish remarks, the US dollar fell against most major currencies, with the Wall Street Journal Dollar Index losing 0.9% to 87.01. EUR/USD increased 0.9% to 1.1289, GBP/USD gained 0.9% to 1.4380, USD/JPY dropped 0.7% to 112.66, USD/CAD was down 0.8% to 1.3072, and AUD/USD surged 1.1% to 0.7625.The pair tested 112.35 this morning as it continued the decline initiated at yesterday's high of 113.80. Currently the bearish bias is maintained by the descending 20-period (30-minute chart) moving average, which is well below the 50-period one. And the intraday relative strength index is badly directed below the neutrality level at 50. The intraday outlook remains very bearish and the pair should re-test 112.35 again. A break below 112.35 could trigger a further decline toward the next support at 112.05. Key resistance is located at 113.20.
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 112.05. A break of this target will move the pair further downwards to 111.60. The pivot point stands at 113.20. 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, 114.10
Support levels: 112.05, 111.60, 111.20