Overview:
USD/JPY is trading in lower range after retreating sharply from four-month high of 80.38 on Friday. The rate is undermined by trimming of short-JPY exposures ahead of tomorrow's Bank of Japan policy meeting - market participants are wary of disappointment on expectations for BOJ to aggressively expand the size of its Y80 trillion asset-purchase program. USD/JPY is also weighed by lower U.S. Treasury yields, Japan exporter sales, and concerns about U.S. "fiscal cliff" in early 2013 that could throw the U.S. economy back into recession. But USD/JPY losses tempered by demand from Japan importers, buying of yen crosses amid diminished risk aversion (VIX fear gauge eased 1.71 to 17.81) as U.S. economy grew stronger-than-expected 2% in third quarter (vs. +1.8% forecast), although Wall Street closed narrowly mixed on Friday (DJIA up 0.03%; S&P down 0.07%), as sentiment dented after final October reading of University of Michigan consumer sentiment index came in at 82.6, falling from initial reading of 83.1, versus expectations for it to remain unchanged, and worries over the euro zone as Spain's 3Q unemployment rate rose above 25% for first time on record.
Preference:
USDJPY is trading in lower ranges, short position is recommended. Sell below 79.9 with targets 79.4 and 79.15 in extension.
Support Levels:
S1 - 79.4
S2 - 79.14 (Oct. 19 low)
S3 - 78.91 (Oct. 18 low)
Alternative scenario:
In case market moves opposite. Buy above 79.9 and look for further upside with 80.1 and 80.35 as targets.
Resistance Levels:
R1 - 80.1
R2 - 80.38 (Friday's high)
R3 - 80.63 (June 25 high)
Technical Comment:
As long as 79.9 is resistance, look for choppy price action with a bearish bias. USD/JPY daily chart is mixed as MACD is bullish but stochastics have turned bearish at overbought; bearish outside-day-range pattern was completed on Friday.
