FX.co ★ Technical analysis of USD/JPY for May 11, 2016

USD/JPY is expected to trade in a higher range as the pair is bullish above 108.20. Overnight U.S. stock indexes rose over 1% posting their biggest gains in two months. Stocks climbed across the board, led by those in the capital goods, energy and materials sectors. The Dow Jones Industrial Average climbed 1.3% to 17928, the S&P 500 added 1.3% to 2084, and the Nasdaq Composite was also up 1.3% to 4809.

Nymex crude oil rebounded 2.8% to $44.66 a barrel, gold gained 0.2% to $1266 an ounce, while the benchmark 10-year Treasury yield was little changed at 1.760%.

Regarding forex trading, the US dollar stayed firm against other major currencies. The Japanese yen kept weakening as Japanese Finance Minister Taro Aso repeatedly mentioned intervention against the yen's recent sharp appreciation. USD/JPY rose another 0.9% to 109.25

EUR/USD slide another 0.1% to 1.1368, USD/CHF was up 0.5% to 0.9757, while GBP/USD rallied 0.2% to 1.4440.

At the same time commodities-linked currencies rebounded along with oil prices, with USD/CAD dropped 0.4% to 1.2910, AUD/USD rallied 0.7% to 0.7362.

The pair ran up to 109.34 overnight before entering a consolidation. Although the intraday relative strength index has fallen below the neutrality level of 50 indicating the possibility of an extended consolidation, the pair has managed to locate support from the ascending 50-period moving average. In case the pair emerges on the upside upon completing the consolidation, it should proceed toward the first upside target at 109.90 (a key resistance seen in April 20-21).

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 109.40 and the second one, at 109.90. In the alternative scenario, short positions are recommended with the first target at 107.40 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 107. The pivot point is at 108.20.

Resistance levels: 109.40, 109.90, 110.45

Support levels: 107.40, 107, 106.55