USD/JPY is expected to trade in a lower range. US stocks retreated on muted volume (5.3 bln shares vs YTD average of 6.7 bln shares) with the Dow Jones Industrial Average losing 0.4% to 16,370, the S&P 500 declining 0.4% to 1,953, and the Nasdaq Composite easing 0.3% to 48,205. Nymex crude oil dropped 1.4% to settle at $44.00 a barrel, gold was 0.4% higher at $1,108 an ounce, while the 10-year Treasury yield edged down to 2.181% from 2.183% last Friday. Overnight, the US dollar remained soft against most other major currencies as market data on the Fed funds futures showed that most investors believe the Federal Reserve will leave interest rates unchanged at its meeting later this week. AUD/USD remains firm above the 0.7100 level, while Malcolm Turnbull has won the leadership of the ruling Liberal Party and will replace Tony Abbott as Australia's prime minister. The pair is below both the 20- and 50-period intraday moving averages (MAs), and it is currently trading along the upper Bollinger band while those bands are widening. And the intraday relative strength indicator (RSI) is well directed within the buying area between 50 and 70. Therefore, the intraday outlook has turned bearish. The first downside target is set at 119.60 and the second one at 119.10 (around the high of September 11).
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 119.60. A break of that target will move the pair further downwards to 119.10. The pivot point stands at 120.80. 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 121.30 and the second target at 121.70.
Resistance levels: 121.30 121.70 122
Support levels: 119.60 119.10 118.75
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