Overview:
USD/JPY is consolidating with bullish bias after hitting one-week high of 80.31on Wednesday. JPY sentiment is hurt after Japan's ruling Democratic Party agreed to hold lower house elections Dec. 16--ruling party widely expected to be defeated, which would pave way for return to power by Liberal Democratic Party whose leader Shinzo Abe has urged Bank of Japan to print "unlimited yen" to reach a new inflation target. USD/JPY is also supported by demand from Japan importers. But USD/JPY gains tempered by Japan exporter sales; selling of yen crosses amid increased risk aversion (VIX fear gauge rose 7.63% to 17.92, S&P fell 1.18% overnight) on concerns over U.S. fiscal cliff and European economic weakness; bigger-than-expected 0.3% drop in U.S. October retail sales (vs. minus 0.2% forecast); weaker USD sentiment after surprise 0.2% on-month drop in U.S. October PPI (vs. forecast for 0.2% increase) and minutes from Federal Reserve's latest policy meeting showing some officials favoring more monthly bond purchases next year after the expiration of Operation Twist.
Preference:
Buy above 80.3 with 81 and 81.4 as next targets.
Resistance Levels:
R1 - 80.31 (Wednesday's high)
R2 - 80.45 (Nov. 6 high)
R3 - 80.57-80.68 band (Nov. 5 high-Nov. 2 high)
Alternative scenario:
Sell below 80.3. The downside penetration of 80.3 will call for 80.05 and 79.75.
Support Levels:
S1 - 80.05
S2 - 79.75
S3 - 79.5
Technical Comment:
The pair has broken above its resistance and remains on the upside. USD/JPY daily chart is mixed as MACD is bearish, but stochastics turned bullish.