Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Chart Of The Day: USD/JPY Coils Ahead Of NFP; Will It Head Lower Afterward?

By Fawad RazaqzadaForexSep 04, 2020 06:47AM ET
www.investing.com/analysis/chart-of-the-day-usdjpy-coils-ahead-of-nfp-200536401
Chart Of The Day: USD/JPY Coils Ahead Of NFP; Will It Head Lower Afterward?
By Fawad Razaqzada   |  Sep 04, 2020 06:47AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

This article was written exclusively for Investing.com

The USD/JPY has risen this week as the U.S. dollar staged a comeback across the board. However, it remains to be seen whether the rebound will last very long today.

I will be closely watching the reaction to the U.S. nonfarm jobs report, scheduled  for later, to see whether market participants decide to put their “risk-on” caps back on or remain in “risk-off” mode following the big sell-off in the US technology sector on Thursday.

Normally, the jobs report has a big impact on the direction of the dollar, especially on occasions when the headline number deviates from expectations by a significant margin. But since the pandemic, the greenback has become more sensitive to the “risk-on, risk-off” trade than macro data. Risk-on is when stocks rally along with commodities, and this tends to boost the appetite for commodity dollars and other foreign currencies, causing the dollar to go lower.

The fact that the dollar has been behaving this way is mainly a reflection of investor expectations that the Fed will keep monetary policy loose for a long time and individual data releases will not materially impact their thinking much, and therefore the direction of interest rates. So, today’s jobs data will need to be seen from the viewpoint of the Fed’s policymakers.

Unless it is very bad or very good, anything in-between is unlikely to cause too much of a reaction in the dollar in the way you would normally expect it to. Thus, for FX traders it may be worth paying closer attention to U.S. index futures, including the Dow Jones, S&P 500 and NASDAQ, and how they respond to the jobs report, before deciding on the direction for the dollar.

From a technical point of view, the USD/JPY remains in consolidation mode. But soon it could stage a breakout in one or the other direction, and the motion could potentially start with the jobs report today.

USD/JPY Daily
USD/JPY Daily

The USD/JPY has fallen in the previous two weeks before rebounding this week. On Thursday, though, it created a doji-like candle on the daily time frame, potentially suggesting the rebound has run its course. Thus, what I am looking for today is a clean break below Thursday’s low and support at 106.00. Should that happen then a drop towards the key 105.00 handle would become very likely.

But given the weekly lower highs and the general direction of the dollar for the past few months, the potential sell-off could go much deeper over time.

USD/JPY Weekly
USD/JPY Weekly

That said, I would drop my bearish view on this pair in the short-term, in the event rates break last week’s high around 106.95 on a daily closing basis. For if that happens, it would indicate the bearish pressure is weak and therefore no reason to expect a big drop.

But as traders, we should let the market decide what it wants to do, especially as it is a NFP day today. The market’s reaction to news is always more important than the news itself. So, if, after the jobs report is released, the USD/JPY goes down below 106.00 and stays lower, then I would be more inclined to short the USD/JPY pair, regardless of how good or otherwise the data is, for the reasons stated above.

Chart Of The Day: USD/JPY Coils Ahead Of NFP; Will It Head Lower Afterward?
 

Related Articles

Al Brooks
EUR/USD : Small Breakout By Al Brooks - Apr 16, 2021 1

o    Small breakout above March 18 high. Bulls need consecutive closes above that high, for traders to look for rally to continue up to next resistance at Feb. 25 lower...

JFD Team
GBP/CAD Trades Within A Sideways Range By JFD Team - Apr 16, 2021

GBP/CAD traded higher yesterday, but hit resistance at 1.7310 and today, it pulled back. Overall, the rate has been trading within a sideways range, between 1.7175 and 1.7435,...

Yuri Papshev
NZS/USD: Trading Recommendations By Yuri Papshev - Apr 16, 2021

Strong US economic data can no longer support the US dollar, which is more responsive to the dynamics of US government bonds. It is worth waiting for its further fall. In case of...

Chart Of The Day: USD/JPY Coils Ahead Of NFP; Will It Head Lower Afterward?

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (3)
Anwar Gil C
Anwar Gil C Sep 04, 2020 8:33AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I think it will come down take orders and boom up
Maira Kamid
Maira Kamid Sep 04, 2020 8:05AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Congratulations ser winners
Moses Tumuheki
Moses Tumuheki Sep 04, 2020 7:49AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
It's to going to go bullish
Sanchez Berry
Sanchez Berry Sep 04, 2020 7:49AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
What do you think of usdcad i just bought it my tp is 1.33349
obedi Abraham
obedi Abraham Sep 04, 2020 7:49AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Everything is telling the trend is downward, why did you buy?
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email