Overview:
USD/JPY is consolidating after hitting two-and-a-half year high of 93.18 on Monday. The rate is undermined by flows to safe-haven JPY and unwinding of JPY-funded carry trades amid increased risk aversion (VIX fear gauge rose 13.72% to 14.67, S&P fell 1.15% overnight) as concerns about Spain and Italy return, while U.S. December factory orders rose lower-than-expected 1.8% (vs. +2.2% forecast). USD/JPY is also weighed by profit-taking on yen-shorts; Japan exporter sales. But USD/JPY losses tempered by demand from Japan importers; aggressive Bank of Japan's monetary easing policy to combat inflation and achieve a weaker yen - Japanese Finance Minister Aso told parliament Monday that it remains a top priority to overcome yen strength. USD/JPY daily chart is mixed as MACD bullish, 5- and 15-day moving averages are rising; but stochastic is turned bearish at overbought; bearish dark-cloud-cover candlestick pattern was completed on Monday.
Preference:
Buy above 91.95 with targets at 93.15 and 93.4 in extension.
Resistance levels:
R1 - 93.18 (Monday's high)
R2 - 93.4
R3 - 93.
Alternative scenario:
Sell below 91.95. Below 91.95 look for further downside with 91.35 and 90.7 as targets.
Support levels:
S1 - 91.35
S2 - 90.75-90.67 band (Thursday's low-Wednesday's low)
S3 - 90.33-90.29 (Jan. 29 low-Jan. 25 low)
Technical comment:
The RSI is bullish and calls for further upside.
