Overview:
USD/JPY is trading with bullish bias. The rate is underpinned by yen-funded carry trades amid positive global risk sentiment (VIX fear gauge eased 4.71% to 15.57, S&P rose 1.15% overnight) as U.S. lawmakers narrowed differences in budget negotiations, raising optimism over a deal to avoid the fiscal cliff of tax hikes and spending cuts; meanwhile, U.S. NAHB housing market index rose for the eighth-straight month to 47 in December, its highest level in six-and-a-half years; and worries over the euro-zone debt crisis decreased after Standard & Poor's upgraded Greek government debt. USD/JPY is also supported by demand from Japan importers and investment trusts; pressure from incoming LDP government on the Bank of Japan for more aggressive monetary easing. But USD/JPY gains tempered by Japan exporter sales.
Data focus:
13:30 GMT U.S. November housing starts and building permits.
Preference:
Buy above 84.05 with targets 84.5 and 84.7 in extension.
Resistance Levels:
R1 - 84.48 (Monday's high)
R2 - 84.7
R3 - 85.00
Alternative scenario:
Sell below 84.05. Below 84.05 look for further downside with 83.75 and 83.6 as targets.
Support Levels:
S1 - 83.75
S2 - 83.61 (Monday's low)
S3 - 83.32 (Friday's low)
Technical Comment:
The pair remains on the upside and is challenging its previous high. USD/JPY daily chart is positive-biased as MACD is bullish, stochastic stays elevated at overbought, 5- & 15-day moving averages are rising; though inside-day-range pattern was completed on Tuesday.
