USD/JPY is expected to trade with a bullish bias.Overnight U.S. stock indexes closed broadly lower, weighed by retail and consumer shares. Office Depot (ODP) slumped 40.4% and Staples (SPLS) dropped 18.3% after announcing the termination of their merger agreement. Macy's (M) fell 15.2% as it lowered its full-year guidance. The Dow Jones Industrial Average declined 1.2% to 17711, the S&P 500 lost 1.0% to 2064, and the Nasdaq Composite was also down 1.0% to 4760.
Boosted by the U.S. report of an unexpected fall in crude inventories, Nymex crude oil surged 3.5% to $46.23 a barrel. Gold rose 0.9% to $1,277 an ounce, silver jumped 1.7% to $17.40 an ounce, while the benchmark 10-year Treasury yield eased to 1.735% from 1.760% in the previous session.
On forex trading, the U.S. dollar reversed its course and gave up some gains made in the prior six sessions rallying. EUR/USD rebounded 0.5% to 1.1425, USD/JPY dropped 0.8% to 108.41, GBP/USD added another 6 pips to 1.4446, and USD/CHF was down 0.5%.
Meanwhile, commodities-linked currencies continued to rebound against the greenback. USD/CAD lost another 0.5% to 1.2848, AUD/USD rose 0.2% to 0.7375, while NZD/USD was up 0.9% to 0.6817. The pair continues on its consolidation while being capped by the 20-period (30-minute chart) moving average. Meanwhile the level at 108.20 is holding as the key support. At the same time, the intraday relative strength index is under the neutrality level of 50, showing a lack of upward momentum for the pair. If 108.20 holds as the key support, the pair stands a chance of returning to the first upside target at 109.40.
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 109.40 and the second one, at 109.90. In the alternative scenario, short positions are recommended with the first target at 107.40 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 107. The pivot point is at 108.20.
Resistance levels: 109.40, 109.90, 110.45
Support levels: 107.40, 107, 106.55