Overview:
USD/JPY has consolidated with bullish bias after hitting 28-month high of 86.85 this morning as markets await U.S. House of Representatives vote on budget plan. Liquidity thin in Asia as Japan markets shut today for holiday. USD/JPY is supported after U.S. Senate voted overwhelming 89-8 to clear deal to avoid the fiscal cliff. USD/JPY is also buoyed by expectations that Bank of Japan will take aggressive measures to stimulate economic growth. But risk sentiment dented after China official manufacturing PMI for December came in unchanged at 50.6 from November, lower than 51.0 forecast. USD/JPY topside is also limited by profit-taking on yen-shorts; buy-yen orders from Japan exporters.
Preference:
Buy above 86.75 with targets 87.4 and 87.7 in extension.
Resistance Levels:
R1 - 87.4
R2 - 87.7
R3 - 88.00
Alternative scenario:
Below 86.75 look for further downside with 86.5 and 86.1 as targets.
Support Levels:
S1 - 86.5 (Monday's low)
S2 - 86.1
S3 - 85.7
Technical Comment:
The pair is facing a pullback on its support but remains on the upside. USD/JPY daily chart is positive-biased as MACD is bullish, stochastic stays elevated at overbought, 5- & 15-day moving averages are rising; bullish outside-day-range pattern was completed on Monday.
