Technical Analysis of USD/JPY for May 27, 2016
USD/JPY is expected to trade with a bullish bias. Overnight U.S. indexes were little changed after rallying 2% over the prior two sessions. The Dow Jones Industrial Average eased 0.1% to 17828, the S&P 500 was broadly flat at 2090, while the Nasdaq Composite was up 0.1% to 4901. Utilities, retail, and technology shares advanced, while materials and bank shares were under pressure.
On the economic data front, initial jobless claims fell to 268,000 in the week ended May 21 (vs 275,000 expected) from 278,000 in the previous week. Durable goods orders increased 3.4% in April (vs +0.5% expected, +1.9% in March).
Nymex crude oil declined 0.2% to $49.48 a barrel, although it had surged up to $50.21 earlier in the session, the first time it had touched the psychological $50 level since October 2015. Gold dropped 0.3% further to $1,220 a troy ounce, marking a seven-session losing streak involving a total decline of 4.7% or $60 an ounce.
Meanwhile, U.S. government bonds strengthened, with the benchmark 10-year U.S. Treasury yield falling to 1.823% from 1.870% in the previous session.
Regarding forex trading, the U.S. dollar continued to consolidate after its recent ascent. EUR/USD rose 0.4% to 1.1192, and USD/JPY dropped 0.4% to 109.75.
On the other hand, having surged 1.5% or 212 pips in the previous two sessions, GBP/USD took a pause yesterday and declined 0.2% to 1.4664, and is yet to break above the overhead 200-day moving average at 1.4701.
The Canadian dollar was driven higher by oil's brief encounter with $50 a barrel. USD/CAD lost another 0.3% to 1.2976 (day-low at 1.2907). At the same time, AUD/USD kept rebounding, gaining 0.4% to 0.7225.
Meanwhile, traders should be listening closely to Federal Reserve Chairwoman Janet Yellen who will speak Friday night at Harvard University's Radcliffe Institute.The pair posted choppy actions yesterday, reaching up to 110.23 and down to 109.38. However, it managed to close off the low. Currently it has surged to the upside, breaking above the upper Bollinger band. At the same time, while riding on a rising trend line, the intraday relative strength index is well directed above the neutrality level of 50. Therefore an acceleration to the upside is expected for the pair, with targets set at 110.25 (around Thursday's high) and 110.60.
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 110.25 and the second one, at 110.60. In the alternative scenario, short positions are recommended with the first target at 109.10 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 108.65. The pivot point is at 109.45.
Resistance levels: 110.25,110.60, 111
Support levels: 109.10, 108.65, 108.20