Overview:
USD/JPY is consolidating with bullish bias after hitting 29-month high of 87.56 this morning, as markets await 13:30 GMT U.S. December non-farm payrolls (expected to increase by 150,000) and unemployment rate (expected to stay unchanged at 7.7%). USD/JPY is underpinned by stronger USD demand after U.S. FOMC meeting minutes showed several members want to slow or end its $85 billion monthly bond-buying program "well before" the end of 2013. USD/JPY is also supported by higher U.S. Treasury yields; demand from Japan importers and investment trusts; expectations that Bank of Japan will take aggressive easing action to boost the nation's economy and tackle deflation. But USD/JPY gains tempered by Japan exporter sales; selling of yen crosses amid increased risk aversion (S&P fell 0.21% overnight) on possible end to Fed's asset-purchase stimulus efforts in 2013; positions adjustment before weekend.
Data Focus:
15:00 GMT U.S. November factory orders
15:00 GMT U.S. December ISM non-manufacturing composite index
18:30 GMT Fed's Lacker speech
Preference:
Buy above 87.1 with targets 88.15 and 88.6 in extension.
Resistance Levels:
R1 - 88.11 (July 18, 2011 reaction high)
R2 - 88.6
R3 - 88.85
Alternative scenario:
Sell below 87.1. Below 87.1 look for further downside with 86.75 and 86.5 as targets.
Support Levels:
S1 - 86.77 (Thursday's low)
S2 - 86.54 (Wednesday's low)
S3 - 85.66 (Monday's low)
Technical Comment:
The RSI is bullish and calls for further upside. USD/JPY daily chart is positive-biased as MACD is bullish, stochastic stays elevated at overbought, and 5- & 15-day moving averages are rising.
