The Dollar/Yen edged lower on Friday despite a broad US Dollar strength and a strong rally in equities, which saw the S&P 500 reaching fresh record highs. Somehow, this behavior indicates that traders are still not fully convinced of this recent equity rally, reflecting the belief that the central bank may continue raising rates and bring back fear in the equity market. We have no economic data scheduled for today as Japan is kick-starting the week with a holiday, but the US PCE data could have a mild influence on price.
The USD/JPY closed just above a support level on Friday; 111.50 (S1). If the bulls fail to protect this level, then the inverted H&S pattern will be invalidated. Traders will likely attempt to retest 112 (R1) during today’s session, as the market is trying to establish the appropriate sentiment. 112.30 (R1) and 111.50 (S1) are key levels to watch. A break to either side will take the price out from this consolidation period.
Support: 111.5 / 111.25
Resistance: 112 / 112.30