FX.co ★ Technical analysis of USD/JPY for May 25, 2016

USD/JPY is expected to trade with bullish bias. Overnight U.S. indexes posted a strong rebound, lifted by technology and financial shares. The Dow Jones Industrial Average rose 1.2% to 17706, the S&P 500 gained 1.4% to 2076, and the Nasdaq Composite was up 2.0% to 4861.

On the economic front, new-home sales in the U.S. jumped 16.6% month-on-month to 619,000 units (vs 523,000 units expected, 531,000 units in March), the fastest pace in 8 years.

Nymex crude oil increased 1.1% to a fresh 2016-high of $48.62 a barrel (day-high at $49.27). Gold plunged 1.8% further to $1227 a troy ounce, and silver lost 1.0% to $16.20 an ounce. The benchmark 10-year U.S. Treasury yield settled at 1.859%, up from 1.840% in the previous session.

Boosted by positive economic data and further hawkish rate-rise comments from Federal Reserve officials, the U.S. dollar regained upward momentum and rose against most major currencies. EUR/USD lost 0.7% to reach 1.1140, below its long-term 200-day moving average, and USD/JPY rebounded 0.7% to 109.98.

The British pound once shot over 1% to as high as 1.4640 against the greenback Tuesday, as another poll on the Brexit referendum showed that the "In" camp was leading the "Out" one, forcing traders to cover their short positions on the pound. GBP/USD was finally up 1.0% to 1.4630.

Meanwhile USD/CAD declined 0.2% to 1.3119 after testing the overhead 200-day moving average at 1.3153. On the other hand, AUD/USD fell 0.5% to 0.7182, and NZD/USD was down 0.3% to 0.6736 (day-low at 0.6703). The pair posted a strong rebound yesterday after touching levels around 109.00 on the downside. It has regained the 110.00 level and is currently supported by the ascending 20-period (30-minute chart) moving average. The intraday relative strength index is well directed above the neutrality level of 50, lacking downward momentum. The immediate resistance at 110.25 (a level of overlapping support and resistance seen on May 20) is in sight, and the next one would be found at 110.60 (around the high of 110.60).

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 110.25 and the second one at 110.60. In the alternative scenario, short positions are recommended with the first target at 109.10 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 108.65. The pivot point is at 109.45.

Resistance levels: 110.25,110.60, 111

Support levels: 109.10, 108.65, 108.20. 117.90