Overview:
USD/JPY is consolidating with bullish bias after hitting six-and-a-half month high of 81.59 on Monday, as markets await Bank of Japan's monetary policy meeting decision. USD/JPY is buoyed by buying of yen crosses amid positive global risk sentiment (VIX fear gauge eased 7.13% to 15.24; S&P surged 1.99% overnight) on heightened hopes for a compromise in U.S. budget negotiations to dodge the impending fiscal cliff; stronger-than-expected rise in U.S. NAHB housing market index to six-and-a-half year high of 46 in November (vs. 42 forecast) from 41 in October; surprise 2.1% on-month increase U.S. October existing-home sales (vs. forecast for 1.1% decrease). USD/JPY is also supported by demand from Japan importers; expectations that Japan elections Dec. 16 will bring in a new government led by the Liberal Democratic Party and lead to greater monetary easing. But risk sentiment dented after Moody's downgraded France's rating to Aa1 from Aaa. USD/JPY gains also tempered by Japan exporter sales.
Preference:
Long positions above 80.85 with targets at 81.45 and 81.6 in extension.
Resistance Levels:
R1 - 81.45
R2 - 81.59 (Monday's high)
R3 - 81.78 (April 20 reaction high)
Alternative scenario:
Below 80.85 look for further downside with 80.65 and 80.3 as targets.
Support Levels:
S1 - 80.65
S2 - 80.3
A3 - 80.13 (Thursday's low)
Technical Comment:
The pair stands above its support and remains on the upside. USD/JPY daily chart is positive-biased as MACD and stochastics are bullish, although latter is at overbought; five- and 15-day moving averages are rising.