Technical analysis of USD/JPY for January 06, 2016 Market Analysis Review

USD/JPY is under pressure. Overnight, US stocks managed to end with small gains, helped by shares in telecoms, utilities and consumer staples sectors. The Dow Jones Industrial Average added 0.1% to 17,158, the S&P 500 rose 0.2% to 2,016, while the Nasdaq Composite was down 0.2% to 4,891.

Nymex crude oil fell 2.2% further to $35.97 a barrel, gold gained 0.3% to $1,077 an ounce, and the benchmark 10-year Treasury yield was broadly flat at 2.248%.

Meanwhile, the US dollar continued to strengthen against other major currencies with the Wall Street Journal Dollar Index once reaching 90.89, the highest level since November 2002. EUR/USD dropped another 0.8% to 1.0746, GBP/USD fell 0.3% to 1.4671, USD/CHF rose 0.7% to 1.0081, and USD/CAD was up 0.3% to 1.3995. However, USD/JPY declined a further 0.3% to 119.05.The pair remains capped by both the 20-period (30-minute chart) moving average and the key resistance at 119.30. It is currently trading around the 20-period moving average, while the intraday relative strength index is hovering around the neutrality level of 50 lacking upward momentum. If the pair keeps on failing to break above 119.30, it stands a higher chance of returning to the first downside target at 118 (around yesterday's low). The second downside target is set at 117.60 (last seen on October 15).

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 118. A break of that target will move the pair further downwards to 117.60. The pivot point stands at 119.30. 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 119.70 and the second target at 120.10.

Resistance levels: 119.70, 120.10, 120.75

Support levels: 118, 117.60, 117.35

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