The US dollar fell to kick off the session on Friday, only to turn things around near the 50 Day EMA.
USD/JPY
The US dollar has pulled back a bit against the Japanese yen during the trading session here on Friday to test the 50-day EMA yet again. This is an area that's held as both support and resistance multiple times in the last six or seven trading sessions, and I think you've got a scenario where a lot of traders are looking at the interest rate differential and buying the US dollar. But at the same time, I think it also makes quite a bit of sense that this pair continues to be very noisy, not only due to the interest rate differential but the fact that the Bank of Japan is somewhat stuck and may not be able to tighten monetary policy very rapidly.
Beyond that, we also have to keep in mind that there are concerns about geopolitics over the weekend with the potential of American military action in Iran, and that could drive money back into the yen in a safe haven bid.
Support and Resistance Levels
Ultimately though, what I am looking at is a market that is just compressing and trying to spring for a bigger move. If and when that happens, I anticipate that the place that you'll be looking for is the 160-yen level. If we can break above the 160-yen level, that could be a big winner for this pair and it could send this pair much, much higher. In fact, if we can clear the 160 region, we're in the possibility and realm of seeing the US dollar breakout from a swing high that goes all the way back to 1990.
If we break down from here, that's a situation where I think you're looking for buyers to pick up little bits of value. The 200-day EMA currently sits at the 152.62-yen level, I think that's your floor for the time being. I do recognize that volatility is probably going to be a major concern here and you do have to keep that in the back of your mind.