30.11.201212:17 Forex Analysis & Reviews: USD/JPY: Upside Prevails

Overview:
USD/JPY is trading in higher range. The rate is underpinned by buying of yen crosses amid diminished investor risk aversion (VIX fear gauge eased 2.9% to 15.06; S&P rose 0.43% overnight) as hopes linger that a deal would be secured before the year-end deadline for the U.S. economy to dodge the fiscal cliff. Overnight, House Speaker Boehner said that there has been no substantive progress in talks on the fiscal cliff, but later Sen. Charles Schumer said there's been progress behind the scenes and Senate Majority Leader Harry Reid said he thought Congress could finalize a deal this year. Risk appetite also boosted by higher-than-expected 5.2% rise in U.S. October pending home sales (vs. +1% forecast); upward revision in 3Q U.S. GDP to 2.7% from the 2% gain initially reported (though below 2.8% expected); lower-than-expected latest U.S. weekly jobless claims of 393,000 (vs. 395,000 forecast). USD/JPY is also supported by demand from Japan importers and investment trusts; expectations that opposition Liberal Democratic Party will win mid-December elections and push for aggressive monetary easing. But risk appetite dented after Kansas City Fed's manufacturing composite index declined to minus 6 in November from minus 4 in October. USD/JPY gains also tempered by Japan exporter sales; positions adjustment before weekend.
Preference:
Buy above 82 with targets at 82.6 and 82.85.
Resistance Levels:
R1 - 82.63 (Monday's high)
R2 - 82.84 (seven-and-a-half month high hit Nov. 22)
R3 - 83.00  
Alternative scenario:
Sell below 82.The downside breakout of 82 will open the way to 81.65 and 81.4.
Support Levels:
S1 - 81.68-81.65 (Wednesday's low-Nov. 21 low)
S2 - 81.4
S3 - 81.13-81.08 (Nov. 20 low-Nov. 19 low)  
Technical Comment:
The pair remains on the upside and is challenging its new resistance. USD/JPY daily chart is mixed as MACD is bullish; but stochastics is bearish at overbought.