FX.co ★ USD/JPY: Upside

Overview:
USD/JPY is consolidating with bullish bias after hitting two-and-a-half year high of 93.79 this morning. The rate is underpinned by yen-funded carry trades amid positive investor risk sentiment (VIX fear gauge eased 6.48% to 13.72; S&P surged 1.04% overnight) as better-than-expected euro-zone composite PMI outweighed residual anxiety over unsettling political developments in Spain and Italy; while U.S. ISM non-manufacturing composite index fell less than expected to 55.2 in January (vs. 55.0 forecast) from a revised 55.7 in December, and U.S. IBD/TIPP Economic Optimism Index rose 1.7% to 47.3 in February from 46.5 in January. USD/JPY is also supported by higher U.S. Treasury yields; 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--BOJ Gov. Shirakawa offered to resign from his post on March 19 versus original plan of April 8, suggesting the central bank will get more dovish sooner than previously thought at its April 4 meeting. But USD/JPY gains tempered by Japan exporter sales. USD/JPY daily chart is positive-biased as bullish outside-day-range pattern was completed on Tuesday; MACD bullish, stochastic stays elevated at overbought, 5- and 15-day moving averages are rising.
Preference:
Buy above 93 with targets at 94 and 94.45 in extension.
Resistance levels:
R1 - 94
R2 - 94.45
R3 - 94.99 (May 4, 2010 top)
Alternative scenario:
Sell below 93. Below 93 look for further downside with 92.55 and 91.95 as targets.
Support levels:
S1 - 92.55
S2 - 91.96 (Tuesday's low)
91.61 (Friday's low)
Technical comment:
The next resistances are at 94 and then at 94.45.