USD/JPY is expected to trade in a lower range. The US dollar remains firm with the USD index currently trading at 96.856 as traders shrugged off a weak reading on the manufacturing sector (Empire State Manufacturing Index fell to -14.92 in August, the lowest level since April 2009, from +3.86 in July). Besides, US stocks edged up overnight amid thinner-than-usual trading activity. The Dow Jones Industrial Average gained 0.4% to 17545.18, S&P 500 rose 0.5% to 2102.44, and the Nasdaq Composite was up 0.9% to 5091.70. The 10-year Treasury yield fell to 2.150% as crude oil dropped 1.5% to a fresh six-year low of $41.87 a barrel and gold was down 0.5% % to $1118.60 per ounce. Regarding USD/JPY, the pair remains range-bounded between the key resistance at 124.60 and the first downside target at 124.00. The pair has failed several times to breach the key resistance at 124.60 since August 13. As long as this level is not surpassed, the risk of breaking below 124.00 stays high. The second downside target is set at 123.75 (around the low of August 12).
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 124. A break of that target will move the pair further downwards to 123.75. The pivot point stands at 124.60. 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 125 and the second target at 125.25.
Resistance levels: 125 125.25 125.60
Support levels: 124 123.75 123.50
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