USD/JPY is expected to advance further. The pair remains on the upside, backed by a rising trend line which emerged on Nov 29. In addition, formation of the higher highs and lows remains intact, which should confirm a positive outlook. Meanwhile, the relative strength index is held up by an ascending trend line.
On Wednesday, US stock indexes lacked upward momentum despite the fact that energy shares jumped on soaring oil prices driven by the OPEC’s output cut agreement. The Dow Jones Industrial Average marked an all-time intraday high of 19,225 but closed at 19,123, up about 2 points on day. The S&P 500 eased 5 points (-0.3%) to 2,198, and the Nasdaq Composite dropped 56 points (-1.1%) to 5,323.
Bank shares also gained as Steve Mnuchin, who has been selected by president-elect Donald Trump to be the US Treasury secretary, pointed out in a CNBC interview that the new administration would make tax reforms and trade pact overhauls the top priorities.
US government bonds saw their selloff regain momentum as surging oil prices and solid US economic data raised investors’ appetite for riskier assets. The benchmark 10-year US Treasury yield settled at 2.365%, its highest closing level since July 2015, up from 2.305% Tuesday.
Facing a stronger US dollar, gold shed 1.3% to $1,172 an ounce, its lowest closing level since February 5. Silver was down 0.7% to $16.48 an ounce.
The US dollar strengthened as higher oil prices enhanced inflation expectations and US bond yields. In fact, the chance of a rate increase is now 94%, according to the Fed’s fund futures tracked by CME. The ICE US Dollar Index rose 0.6% to 101.55.
Hence, as long as 113.25 is not broken, an advance to 114.0 and 115.30 in extension is likely.
Trading Recommendation: 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 114.80 and the second one at 115.30. In the alternative scenario, short positions are recommended with the first target at 112.55 if the price moves below its pivot point. A break of this target is likely to push the pair further downwards, and one may expect the second target at 112. The pivot point lies at 113.25.
Resistance levels: 113.25, 113.90, 114.25
Support levels: 110.75, 110.25, 110
The material has been provided by InstaForex Company – www.instaforex.com
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