Overview:
USD/JPY is range trading. The rate is underpinned by yen-funded carry trades amid improved risk sentiment as worries over global economic health eased after China's trade surplus increased more than expected to $27.67 billion in September from $26.7 billion in August (vs $22.4 billion forecast), while exports rose 9.9% on year to record monthly level of $186.4 billion; surprise jump in University of Michigan consumer sentiment index to 83.1 in October, highest level since September 2007, from 78.3 in September (vs. forecast for decline to 78.0). USD/JPY is also supported by demand from Japan importers and investment trusts. But USD/JPY upside is limited by Japan exporter sales; renewed worries over Europe's sovereign debt crisis after reports suggested Spain could delay seeking a bailout from the ESM until November; concerns about U.S. "fiscal cliff" - more than $600 billion in government spending cuts and tax increases that would kick in early next year - that could throw the U.S. economy back into recession. Yen crosses are vulnerable to 01:30 GMT China September CPI data.
Preference:
Long positions above 78.35 with targets at 78.75 and 78.88 in extension.
Resistance Levels:
78.76 (Oct. 8 high, near 100-day moving average)
78.88 (Oct. 5 high)
79.23 (Sept. 19 high)   
Alternative scenario:
Below 78.35 look for further downside with 78.25 and 78.1 as targets.
Support Levels: 
78.28 (Friday's low)
77.94 (Thursday's low)
77.79 (Oct. 1 low)  
Comment:
The RSI calls for a new upleg. USD/JPY daily is positive-biased as MACD and stochastics are in bullish mode; though, inside-day-range pattern werecompleted on Friday.