Overview:
USD/JPY is consolidating with bullish bias after hitting 31-month high of 91.20 on Friday. The rate is underpinned by weak yen sentiment as Japan PM adviser Takenaka, a possible candidate for next head of Bank of Japan, told The Wall Street Journal that the yen still has room to weaken further and many see Y95 to dollar as appropriate; 0.2% on-year drop in Japan December CPI giving government further grounds to pursue its new policies, which include an inflation target of 2%. USD/JPY is also supported by demand from Japan importers and investment trusts; yen-funded carry trades amid positive risk sentiment (S&P up 0.54% on Friday) as better-than-expected corporate earnings outweigh more-than-expected 7.3% drop in U.S. new home sales to 369,000 in December (vs. 385,000 forecast). Risk sentiment also boosted on sign that the euro zone is healing from its sovereign-debt crisis after the ECB said 278 out of 530 banks that received central-bank LTRO loans pledged to repay larger-than-expected EUR137.16 billion this week. But USD/JPY gains tempered by Japan exporter sales. USD/JPY daily chart is positive-biased as MACD and stochastic are bullish; five- and 15-day moving averages are rising.
Preference:
Buy above 90.55 with targets at 91.2 and 91.55 in extension.
Resistance levels:
R1 - 91.20 (Friday's high)
R2 - 91.5
R3 - 091.7
Alternative scenario:
Sell below 90.55. Below 90.55 look for further downside with 90.2 and 89.8 as targets.
Support levels:
S1 - 90.2 (Friday's low)
S2 - 89.8
S3 - 89.6
Technical comment:
The pair is facing a pullback on its support.
