USD/JPY is expected to trade with a bearish bias as key resistance is at 111.05. Overnight, US stocks continued their decline as investors turned to perceived safe-haven assets like US Treasuries, gold and the Japanese yen. The Dow Jones Industrial Average dropped 0.8% to 17603, the S&P 500 lost 1.0% to 2045, and the Nasdaq Composite was down 1.0% to 4843. Utilities and financial shares were the worst performers.
On the economic data front, the US trade deficit rose to a six-month high of $47.1 billion in February (vs $46.2 billion deficit expected) from $45.9 billion in January. The Markit US Services PMI was 51.3 in March (vs 51.2 expected, 51.0 in February), and the ISM Non-Manufacturing Composite Index was at 54.5 in March (vs 54.2 expected, 53.4 in February).
Nymex crude oil gained 0.5% to $35.89 a barrel, gold surged 1.3% to $1,231 an ounce, while the benchmark 10-year Treasury yield declined further to 1.727% from 1.779% in the previous session.
On the forex front, the US dollar slid further against the yen, with USD/JPY falling 0.9% to 110.31, the lowest level since October 31, 2014. On the other hand, the pound reversed course and fell 0.7% to 1.4159. Those commodities-linked currencies continued to be under pressure, with USD/CAD rising 0.4% to 1.3135 (day-high at 1.3217), AUD/USD dropping 0.8% to 0.7543 and NZD/USD being down 0.4% to 0.6803. Meanwhile, EUR/USD edged down 8 points to 1.1382.The pair keeps trading on the downside while being capped by a declining trend line. The intraday bearish bias is maintained by the descending 20- and 50-period (30-minute chart) moving averages. A break below the psychological 111.05 level would bring the pair to the first downside target at 109.90 (around yesterday's low) and then to the second one at 109.50 (last seen on October 31, 2014).
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 109.90. A break of this target will move the pair further downwards to 109.50. The pivot point stands at 111.05. 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 111.40 and the second target at 111.75.
Resistance levels: 111.40, 111.75, 112.00
Support levels: 109.90, 109.50, 109