USD/JPY is turning downwards. The pair has confirmed a head-and-shoulders bearish reversal pattern and is drifting downwards. Last Friday, U.S. stocks advanced over 2% amid a global stock-market rally set off by the Bank of Japan's decision to introduce negative interest rates. Oil prices kept climbing, and strong buying was spotted in information technology shares. The Dow Jones Industrial Average rose 2.5% to 16,466, the S&P 500 also gained 2.5% to 1,940, while the Nasdaq Composite was up 2.4% to 4,613.

Nymex crude oil increased 1.2% to $33.62 a barrel, gold edged up 0.3% to $1,117 an ounce, while the benchmark 10-year Treasury yield declined further to 1.928% from 1.980% on Thursday.

Boosted by the BOJ's surprise rate move, USD/JPY surged 1.9% to 121.03 (with a day high at 121.68). At the same time, EUR/USD dropped 0.9% to 1.0834, GBP/USD lost 0.8% to 1.4245 and USD/CHF rose 0.9% to 1.0227. Meanwhile, the Canadian dollar kept strengthening against the U.S. dollar thanks to a continued rebound in oil prices, with USD/CAD declining a further 0.4% to 1.3971. The 20-period moving average, which has crossed below the 50-period one, is capping any upward potential for the pair. Meanwhile, the relative strength index is badly directed with the selling area between 50 and 30.

Trading recommendations:

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 120.50. A break of that target will move the pair further downwards to 120.05. The pivot point stands at 121.70. 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 122.20 and the second target at 122.70.

Resistance levels: 122.20, 122.70, 123.25

Support levels: 120.50, 120.05, 119.45