USD/JPY is expected to trade in a lower range as the pair is capped by a bearish trend line. Overnight U.S. stocks ended lower, dragged by material and industrial shares. The Dow Jones Industrial Average fell 0.3% to 17737, the S&P 500 lost 0.3% to 2066, and the Nasdaq Composite was down 0.5% to 4891.
On the economic data front, U.S. factory orders fell 1.7% on-month in February (as expected, vs 1.2% in January), durable goods orders dropped 3.0% on-month in February (vs -2.8% expected and in January), and New York ISM fell to 50.4 in March from 53.6 in February.
Nymex crude oil dropped another 3.0% to $35.70 a barrel, gold fell 0.6% to $1,215 an ounce, while the benchmark 10-year Treasury yield was down to 1.779% from 1.793% in the previous session.
On the forex front, the U.S. dollar remained steady against the euro, but continued to fall against the yen with USD/JPY declining 0.3% to 111.31. Meanwhile, GBP/USD rebounded 0.3% to 1.4262. On the other hand, along with the slide in oil prices, the greenback strengthened against most commodities-linked currencies, with USD/CAD rising 0.6% to 1.3085, AUD/USD losing 0.9% to 0.7602 and NZD/USD falling 0.8% to 0.6833. The pair has broken below the 111.40 level while being capped by a declining trend line. Currently it is trading around the lower Bollinger band, suggesting an acceleration to the downside. Also, the intraday (30-minute chart) relative strength index has broken down the over-sold 30 level, calling for sustained bearishness. The pair is headed toward the first downside target at 110.55 and the second one at 110.25.
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 110.55. A break of this target will move the pair further downwards to 110.25. The pivot point stands at 111.40. 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 111.75 and the second target at 112.00.
Resistance levels: 111.75, 112.00, 112.45
Support levels: 110.55, 110.25, 109.85