Due to fears of a large reduction in foreign Dollar asset purchases, the American currency fell by 0.86% against the Yen just in couple of hours. The plunge was stopped only after the exchange rate reached located around the weekly S2 and the monthly S1. Accordingly, today bulls are expected to try to restore lost positions. Most probably the surge will last until the pair reaches strong support-turned-resistance at the 112.10 level, which is additionally backed up by the 55-hour . In case of better than expected US PPI data release, the soar might extend to the 112.60 mark, which represents location of the monthly PP together with the 100- and 200-hour SMAs. From the opposite side, the new decline is likely to be halted by the 38.2% level at 111.17 the three-month low at 110.84.
Due to overall weakening of the Dollar triggered by the negative US PPI release and the ECB Meeting Minutes, the currency rate acted in accordance with second scenario. Namely, it began moving downwards and was stopped only at the weekly S3, which is located slightly below the 38.2% Fibonacci retracement level. It should be noted that in the process the pair has formed minor descending channel. In order to recover and reach the opposite side of this pattern, the rate would need to cross a combination of the monthly S1, weekly S2 and the 55-hour SMA.
From this perspective, the Yen most probably will continue to gain value against buck. However, the above retracement level still remains strong support barrier especially on daily timeframe. In addition to that, the southern side is backed by the three-month low located at the 110.84 mark.