- Wall Street ends the day with substantial gains.
- DXY closes in the red for the third straight day.
After testing the critical 110 resistance, where the 200-DMA is located, and failing to break through it on Monday and Tuesday, the USD/JPY pair gathered enough strength on Wednesday and refreshed its highest level in two weeks at 110.26 before making a daily close near 110.20.
Although the US Dollar Index recorded its third straight negative daily close at 93.60 on Wednesday, the improved market sentiment helped the pair extend its gains.
After starting the day on a weak note, major equity indexes in the United States reversed course and reflected a higher risk appetite. The Dow Jones Industrial Average added more than 1% and the S&P 500 gained 0.8%. Finally, the tech-heavy Nasdaq Composite Index, which lost as much as 0.7% in the first couple of hours the NA session, added 51.52 points, or 0.67%.
Technical outlook
“The 4 hours chart shows that the pair settled above its 100 and 200 SMA for the first time since in two weeks, while technical indicators regained the upside, with the Momentum at fresh weekly highs and the RSI near overbought readings and within familiar ranges, all of which supports the upside, without confirming it yet. Relevant daily highs come as the immediate resistances on a break higher, 110.44 May 15th high and 110.90, May 22nd daily high. The upward potential will likely fade on a slide below the 109.75 support,” writes Valeria Bednarik, American Chief Analyst at FXStreet.
According to Bednarik, supports for the pair could be seen at 109.75, 109.35, and 109.00 while resistances align at 110.45, 110.90, 111.20.
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