The US dollar initially tried to rally during the trading session on Friday, but then fell towards the ¥109.30 level before it was all said and done. This is a market that is sensitive to risk appetite, and of course there’s a lot of that concern around the world to continue to push money into the Japanese yen. If we break down below the ¥109 level, the market could go down to the ¥108 level.
Alternately, if we turn around and break above the top of the candle stick for Friday, then I think we will go higher to go looking towards the gap at the ¥111.15 level. A lot of back and forth trading is more likely than not, but if we get a sudden mount down in the stock markets, that will probably send this pair much lower as people head back into the yen for safety.
The Australian dollar has shown signs of life during the trading session on Friday, perhaps in a bid to take risk off for the weekend. We are still in the middle of the larger consolidation area that is roughly 200 pips wide, so I wouldn’t put too much into it quite yet. However, this is a good sign and it does appear that the Australian dollar is getting a bit of a relief rally. I’m not sure if it’s short covering heading into the weekend for fear of some type of positive US/China trade news, and of course the fact that Memorial Day in America is Monday. With that, I think that this is still a market that you’ve got to stay away from until we get out of the blue box that I have drawn on the chart. If we get below the 0.68 handle, it could send the market down to the 0.65 level, just as a break above the 0.70 level could send the market towards the 0.70 level.