The US dollar initially jumped against the yen on Friday, but it is worth noting that the markets are still paying you to hold this pair to the long side.
USD/JPY
The US dollar initially did rally a bit during the trading session here on Friday, but we have given some of that back. It isn't a huge surprise, nor do I think it really matters because, quite frankly, Friday is essentially a throwaway day as most traders won't even be bothered trading until Monday at the earliest.
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That being said, we are in the middle of consolidation, so the fact that we went up early and then turned around later in the same session really doesn't surprise me. This is a market that continues to see the 158 yen level above offer resistance while 155 yen starts the floor. We have the 50-day EMA sitting right there as well, but I think the floor is a little thick here and therefore short-term dips almost certainly offer opportunities.
Market Sentiment and Outlook
If we can break above 158 yen, and I do expect that to happen eventually, we go looking to the 160 yen level. On a breakdown below the 50-day EMA, then the 153 yen level could be targeted for support.
I do expect to see a lot of choppy and erratic behavior, but over the longer term, this is a market that I think continues to be bullish mainly due to the fact that the Bank of Japan cannot tighten monetary policy seriously, and you will continue to get paid to hold onto this pair to the long side at the end of every session.
Granted, that interest rate differential might shrink a bit, and it takes away some of the momentum, but as things stand right now, I don't see any reason to get short, at least not unless there's some type of external shock that really throws a monkey wrench into risk appetite.
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