USD/JPY consolidating multi-week highs at the start of the week

USD/JPY is looking fragile in Asia at the start of the week following a mixed US close where US equities rose (S&P500 +0.4% to a fresh record high), but the DXY closed close to 0.2% lower. 

USD/JPY met fresh highs at 113.88 last week that have not been seen since the end of March's business earlier this year. We are headed in to a key week with the FOMC around the corner (mid Dec) and the nonfarm payrolls at the end of the week along with GDP to indicate whether the US recover has improved in H2 or not, according to official data. The Yen has moved to preferred levels for the BoJ, but with the impending risks associated with the European elections and the ECB's monetary policy under scrutiny, the Yen remains the risk-off vehicle that could come back into vogue and halt the aggressive stance by USD/JPY bulls subsequent of Trump's victory in the US elections on the 8/9th Nov.

USD/JPY price action

"The RSI has rolled over, and the Slow Stochastics is about to turn, while the MACDs are still trending higher," - Analysts at Brown Brothers Harriman explained that, since November 4, the dollar has risen 11% against the yen, reaching almost JPY114 in Asia on Friday before profit-taking emerged.  

"Dollar buying re-emerged ahead of JPY112.50 and support extends toward JPY112.30 A break could see another yen decline that pushes the greenback toward JPY111.60.  The US rate premium continued to widen.  The two-year advantage rose to 1.31%, which is the most since 2008.  At 2.31%, the 10-year premium is at a five-year high."   

In the bigger picture, it looks the drop in the dollar from last year's high (almost JPY126) to this year's low (circa JPY99) was corrective in nature, meeting a little more than the 50% retracement target of the Abenomics induced rally.  This suggests further dollar gains against the yen lie ahead over the medium-term.  Near-term, the JPY114.35-JPY114.65 may offer some resistance on the way to JPY115.00-JPY115.60."