Technical analysis of USD/JPY for January 21, 2016 Market Analysis Review

USD/JPY is under pressure. Overnight, major US stock indices dived along with oil prices, but managed to finish the session well above their lows. The Dow Jones Industrial Average at one point lost over 500 points or 3.2%. While energy shares continued trading lower, healthcare and biotech stocks posted gains. Nymex crude oil slumped another 6.7% to $26.55 per barrel. The DJIA dropped 1.6% to 15,766, the S&P 500 fell 1.2% to 1,859, while the Nasdaq Composite edged down 0.1% to 4,471.

Gold rose 1.3% to $1,100 an ounce, while the benchmark 10-year Treasury yield declined to 1.982% from 2.038% in the previous session.

Meanwhile, USD/CAD declined 0.5% to 1.4501, the first daily drop in 2016, as Canada's central bank decided to leave the policy rate unchanged at 0.50%. At the same time, AUD/USD edged up less than 0.1% to 0.6906 and NZD/USD gained 0.3% to 0.6429. This morning the Canadian, Australian and New Zealand dollars strengthened further. The pair keeps trading on the downside while being capped by the descending 20-period (30-minute chart) moving average, which stands below the 50-period one. The relative strength index stays above the neutrality level of 50 lacking upward momentum. With such a bearish intraday outlook, the pair is expected to decline towards the first downside target at 116.20 (around the low of January 19).

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 116.20. A break of that target will move the pair further downwards to 115.95. The pivot point stands at 117.50. 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 118.10 and the second target at 118.35.

Resistance levels: 118.10, 118.35, 118.75

Support levels: 116.20, 115.95, 115.45

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