USD/JPY is expected to trade with a bullish bias. On Monday, US stock indices posted losses for the second consecutive session. The Dow Jones Industrial Average fell 1.5% to 17140, the S&P 500 dropped 1.8% to 2000, and the Nasdaq Composite was down 2.4% to 4594. Commodity and financial shares performed the worst, while utilities received bids.
European stocks continued to be under pressure, with the Stoxx Europe 600 shedding another 4.1%.
Safe-haven assets were still sought after in the wake of the Brexit vote. Government bonds remained in demand, as the benchmark US 10-year treasury yield sank further to 1.461%, the lowest close since July 2012, from 1.577% Friday. At the same time, the UK 10-year government bond yield went below 1% for the first time on record, and 10-year government yields in Japan, Germany, France, Sweden, Denmark and Switzerland all marked all-time lows.
Moreover, gold gained 0.7% to $1324 an ounce, and silver was up 0.2% to $17.72 an ounce. On the other hand, Nymex crude oil fell another 2.8% to $46.33 a barrel.
The US dollar maintained its upward momentum as the British pound and the euro were heavily sold. After gapping down at the session's open, GBP/USD revisited Friday's low at 1.3224, reaching a day-low at 1.3118 before closing at 1.3218, down 3.4% compared to the prior session.
EUR/USD fell 0.8% to 1.1022 (day-low at 1.0968), and USD/JPY was down 0.2% to 101.99.
Meanwhile, USD/CHF climbed 0.5% further to 0.9779, above its 200-day moving average.
Commodities-linked currencies kept giving up gains made in prior sessions, with USD/CAD rising 0.5% to 1.3071, AUD/USD plunging 1.8% to 0.7322 and NZD/USD shedding 1.9% to 0.6994. Following the huge volatility seen last Friday, the pair has been range-bound between 102.46 and 101.37. Currently, it is trading around the overlapping 20-period (30-minute chart) and 50-period moving averages, while showing a lack of momentum to either direction. The key support has been lowered to 101.30, and caution is advised. If 101.30 is not surpassed, the pair stands a higher chance of re-visiting 103.30 and 104.25 on the upside.
Recommendations:
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 103.30 and the second one at 104.25. In the alternative scenario, short positions are recommended with the first target at 100 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 98.95. The pivot point is at 101.30.
Resistance levels: 103.30, 104.25, 105.00
Support levels: 100.00, 98.95, 98
