FX.co ★ Technical analysis of USD/JPY for May 26, 2016

USD/JPY is expected to trade with a bearish bias. Overnight U.S. indexes rallied further upon the prior session's strong rebound, driven by financial, technology, energy, and commodity shares. The Dow Jones Industrial Average gained 0.8% to 17851, the S&P 500 rose 0.7% to 2090, and the Nasdaq Composite was up 0.7% at 4894.

Nymex crude oil settled 1.9% higher at $49.56 a barrel, its highest level since October. Gold declined 0.2% further to $1,224 an ounce, while the benchmark 10-year U.S. treasury yield ticked higher to 1.870% from 1.859% in the previous session.

On the forex front, the British pound continued to charge higher against the U.S. Dollar as traders re-positioned their bets in view of subsiding fear of "Brexit" from the European Union as suggested by recent polls. GBP/USD rose 0.4% to 1.4694, just a few pips below the overhead 200-day moving average of 1.4701.

The Canadian dollar also strengthened against the greenback overnight as the Canadian central bank decided to maintain its key interest rate at 0.50% and gave a less-dovish-than-expected statement. Firm oil prices also helped drive the currency higher. USD/CAD dropped 0.8% to 1.3018.

Meanwhile, EUR/USD rebounded 0.1% to 1.1153 and AUD/USD was up 0.2% to 0.7196.

USD/JPY gained 0.2% to 110.18 overnight while it had reached a high of 110.45 in the session. However, this morning, the pair reversed course and declined down to 109.40.

NZD/USD was little changed at 0.6738 overnight after a volatile session (day-high at 0.6772, day-low at 0.6721). This morning the pair slid 0.5% down to 0.6703. This morning the pair emerged on the downside after completing a consolidation initiated from overnight's high at 110.45, plunging down to 109.40. Although it is currently off the session's low, intraday technical indicators suggest a swing to a bearish intraday outlook, with the 20-period (30-minute chart) moving average having just crossed below the 50-period one, and the intraday relative strength index having broken below the over-sold level of 30. A break below the immediate support at 109.10 would trigger a further decline toward the next one at 108.65.

Recommendation : 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 109.10. A break of this target will move the pair further downwards to 108.65. The pivot point stands at 110.05. 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 110.25 and the second target at 108.65.

Resistance levels: 110.25,110.60, 111

Support levels: 109.10, 108.65, 108.20