USD/JPY is expected to trade with a bearish bias but the caution should be taken because the pair rebounded from 110.98. Overnight the US stocks continued their slide though they pared some losses by session's end. Financial shares showed obvious weakness. The Dow Jones Industrial Average dropped 1.6% to 15660, the S&P 500 fell 1.2% to 1829, while the Nasdaq Composite was down 0.4% to 4266.
Nymex crude oil dropped a further 4.5% to close at a 13-year low of $26.21 a barrel, gold surged 4.1% to $1,247 an ounce, while the benchmark 10-year Treasury yield closed at 1.642%, the lowest close since May 2013, down from 1.706% in the previous session.
Meanwhile the U.S. dollar weakened further against the yen and the euro, with USD/JPY losing 0.8% further to 112.41 (day low at 110.98) and EUR/USD gaining 0.3% to 1.1321. At the same time big intraday swings were noted when trading GBP/USD (-0.3% to 1.4475), AUD/USD (+0.2% to 0.7108) and NZD/USD (+0.5% to 0.6715). The pair sank to a day-low of 110.98 yesterday before posting a rebound. Currently, it is trading below the key resistance at 113.10 and around the over-lapping 20- and 50-period (30-minute chart) moving averages. And the intraday relative strength index is around the neutrality level of 50. Though the downward momentum is not strong, the pair could post choppy price actions while being capped by the key resistance at 113.10. The first downside target is set at 111.00 (around yesterday's low).
Trading recommendations:
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 111. A break of that target will move the pair further downwards to 110. The pivot point stands at 113.10. 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 114.20 and the second target at 115.25.
Resistance levels: 114.20, 115.25, 115.85
Support levels: 111, 110.25, 109.65