FX.co ★ Technical analysis of USD/JPY for May 09, 2016

USD/JPY is expected to trade with a bullish bias. Last Friday, US stock indices settled higher despite disappointing April payrolls data. Commodities and industrial shares were the best performers. The Dow Jones Industrial Average rose 0.5% to 17740, the S&P 500 gained 0.3% to 2057, and the Nasdaq Composite was up 0.4% to 4736.

Nymex crude oil increased 0.8% to $44.66 a barrel, gold rose 0.8% to $1,288 an ounce, and the benchmark 10-year Treasury yield climbed to 1.779% from 1.756% in the previous session.

The US government reported that non-farm payrolls increased 160,000 in April (vs +205,000 expected, +208,000 in March), the weakest growth since September, and the jobless rate remained unchanged at 5.0% (vs 4.9% expected).

On the forex front, the US dollar was firmer against other major currencies. EUR/USD lost 2 pips, falling to 1.1402, although it had surged to 1.1476 after the US jobs report. GBP/USD dropped 0.4% to 1.4428. Meanwhile, USD/JPY edged down 0.1% to 107.10.

At the same time, the Australian dollar was impacted by the Australian central bank's lowered CPI growth forecast for 2016 (to 1%-2% on-year from 2%-3% previously forecast). The central bank also said: "The board will continue to assess the outlook and adjust policy as needed to foster sustainable growth in demand and inflation outcomes consistent with the inflation target over time." AUD/USD then plunged 1.3% last Friday.

The pair continues its rebound initiated from the low of 106.77 last Friday. Currently it is striking against the upper Bollinger band, suggesting an acceleration to the upside. Support is provided by the 50-period (30-minute chart) moving average. Meanwhile, the 20-period moving average has just crossed above the 50-period one, and the intraday relative strength index has broken above the overbought level of 70, indicating a continuation of the bullish bias. The immediate resistance at 108.25 is in sight. Above that level, the next resistance would be found at 108.70.

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 108.25 and the second one, at 108.70. In the alternative scenario, short positions are recommended with the first target at 106.50 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 106.10. The pivot point is at 107.00.

Resistance levels: 108.25, 108.70, 109.25

Support levels: 106.50, 106.10, 105.50