FX.co ★ USDJPY: Upside

Overview:
USD/JPY is consolidating after hitting 31-month high of 91.41 Wednesday. The rate is undermined by weaker USD sentiment after surprise 0.1% contraction in U.S. 4Q GDP (defying forecast for 0.1% expansion); Federal Reserve's decision to continue purchasing $85 billion each month of long-term Treasury’s and mortgage-backed securities even as policy makers offered a mixed review of the economy. USD/JPY is also weighed by unwinding of JPY-funded carry trades amid diminished investor risk appetite (VIX fear gauge rose 7.59% to 14.32) as U.S. stocks slipped (S&P fell 0.42%) after Fed said it has observed a pause in economic activity during recent months; Japan exporter sales. But risk sentiment soothed by higher-than-expected 192,000 increase in ADP January U.S. private-sector jobs (vs. +165,000 forecast). USD/JPY downside is also limited by demand from Japan importers; negative yen sentiment on aggressive Bank of Japan's monetary easing policy to achieve 2% inflation target and a weaker yen. USD/JPY daily chart is positive-biased as MACD is bullish, stochastic stays elevated at overbought, 5- and 15-day moving averages are rising.
Preference:
Buy above 90.75 with targets at 91.25 and 91.55 in extension.
Resistance levels:
R1 - 91.25
R2 - 91.55
R3 - 91.75
Alternative scenario:
Sell below 90.75. Below 90.75 look for further downside with 90.5 and 90.2 as targets.
Support levels:
S1 - 90.5
S2 - 90.2
S3 - 90
Comment:
The pair is rebounding on its support and is shaping a bullish flag as the RSI is turning up.