Overview:
USD/JPY is trading with bearish bias. The rate is undermined by selling of yen crosses amid negative global risk sentiment (S&P fell 0.32% overnight) as attention turns to U.S. 4Q corporate earnings season and its unimpressive prospects (although Alcoa kicked off reporting this morning with swing into profits) and weak economic data out of Europe. USD/JPY is also weighed by Japan exporter sales and profit-taking on yen-shorts. But USD/JPY losses tempered by demand from Japan importers and expectations that Bank of Japan will take aggressive monetary easing action to boost economy. USD/JPY daily chart is negative-biased as stochastic is falling from overbought and positive MACD histogram bars re contracting, bearish parabolic stop-and-reverse signal hit at 87.04 on Tuesday.
Preference:
Buy above 87.15 with targets at 87.8 and 88.05 in extension.
Resistance Levels:
R1 - 87.88 (Tuesday's high)
R2 - 88.05
R3 - 88.38-88.48 band (Monday's high-Friday's 29-month high)
Alternative scenario:
Sell below 87.15. Below 87.15 look for further downside with 86.8 and 86.5 as targets.
Support Levels:
S1 - 86.77 (Thursday's low)
S2 - 86.54 (Jan. 2 low)
S3 - 86.2
Technical Comment:
The pair has broken above a declining trendline. Now it remains on the upside. The RSI stands above its neutral area and remains well directed.
