Overview:
USD/JPY is trading with risks skewed lower. Liquidity thin as Japan markets shut today, while markets in several other countries will close early for New Year's Eve. USD/JPY is undermined by selling of yen crosses amid increased risk aversion as hopes dwindle that U.S. lawmakers would be able to reach deal to avert the $500 billion in automatic tax hikes and spending cuts due to take effect Jan. 1; comment from Japan's finance minister Taro Aso Friday that Japan was not seeking a drastic fall in its currency, although he also said U.S. authorities should seek a strong USD. USD/JPY is also weighed by buy-yen orders from Japan exporters. But USD/JPY losses tempered by sell-yen orders from Japan importers; expectations that Japan PM Abe will follow through on promises to kick-start the country's economy by driving the yen lower; higher-than-expected December ISM Chicago PMI of 51.6 (vs. 51.0 forecast); stronger-than-expected 1.7% on-month rise (vs. +1.2% forecast) in U.S. November pending home sales index to two-year highs.
Preference:
Sell below 86.35 with targets 85.65 and 85.45 in extension.
Support Levels:
S1 - 85.65
S2 - 85.48 (Thursday's low)
S3 - 85.2
Alternative scenario:
Buy above 86.35. Above 86.35 look for further upside with 86.6 and 87 as targets.
Resistance Levels:
R1 - 86.64 (Friday's high)
R2 - 87.00
R3 - 87.2
Technical Comment:
As long as 86.35 is resistance, likely decline to 85.65.
USD/JPY daily chart is mixed as MACD is bullish, 5- & 15-day moving averages are rising; but stochastic turned bearish at overbought; bearish shooting-star candlestick pattern was completed Friday.