USD/JPY is expected to trade in a lower range as the pair is under pressure.Overnight, US stocks rallied further as they continued to enjoy momentum pumped by Federal Reserve Chairwoman Janet Yellen's dovish comments. Major insurance shares were up on a favorable court ruling concerning MetLife. The Dow Jones Industrial Average gained 0.5% to 17716, the S&P 500 rose 0.4% to 2063, and the Nasdaq Composite was up 0.5% to 4869.
Nymex crude oil edged up 0.1% to $38.32 a barrel, gold dropped 1.4% to $1224 an ounce, while the benchmark 10-year Treasury yield settled at 1.830%, up from 1.814% in the previous session.
Meanwhile, the US dollar weakened further against most major currencies, with the Wall Street Journal Dollar Index falling another 0.4% to 86.73. EUR/USD rose 0.4% to 1.1336, USD/JPY declined 0.2% to 112.42, USD/CAD lost 0.8% to 1.2964, and AUD/USD increased 0.6% to 0.7670. NZD/USD surged 1.1% to a 9-month-high closing of 0.6918. At the same time, GBP/USD was broadly flat at 1.4376 (day-high at 1.4458).
The pair has been posting choppy price action below the key resistance at 112.85. Overnight, it touched 111.98 on the downside. Currently it is trading around the over-lapping 20-period (30-minute chart) and 50-period moving averages (at around 112.30). As long as 112.85 holds as the key resistance, the pair could return to the first downside target at 112.05 (around yesterday's low).
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 112.85. 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 113.20 and the second target at 113.45.
Resistance levels: 113.20, 113.45, 113.80
Support levels: 112.05, 111.60, 111.20