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USDJPY Consolidation Ahead of Non-Farm Payrolls

by on April 4, 2014 3:13 am BST
 

The highly anticipated non-farms payrolls are out tomorrow morning, and economists (and bulls) are praying there was slack in the previous months due to weather conditions. There is an expectation of 199K jobs added in March, but the trend of underperforming expectations could continue (personally, expecting between 150-60K jobs added in March).

The US dollar traded near 10-week highs against the yen on the hopes that there will be the quickest pick up in job growth in four months. Traders are also looking to price in the first interest rate increase by the Federal Reserve since 2006, which could be seen as early as the first quarter of 2015. “Markets have priced in a fairly robust payrolls number, on expectations of a rebound from the poor results caused by the weather,” said Ken Takahashji, assistant VP of global markets at Sumitomo Mitsui Trust bank.

Analysts see strength in the US dollar over the medium-term assuming the Federal Reserve will finish its tapering process by the third quarter this year. The Fed will keep a close eye on the NFPs. If there is continued slack in the job market, adding a fifth month of disappointment, the Fed chair Janet Yellen could look to further support the markets through policy.

The 4H chart is showing USDJPY consolidating within a range, while trending lower. Price action has been contained between 104 and 103.80, after hitting a recent high of 104.10. Intraday support prior to the NFP release can be seen at the 50 EMA, nearing 103.70 with price action support at 103.40.

4H Chart of USDJPY

4H Chart of USDJPY

The daily chart shows a more complete picture that shows potential direction on the data release. The current price action is just above support. The RSI is slightly elevated at 65, but it is curving downward quickly. The +DMI is curving lower, too. This is indicating the loss in bullish movement, but this can be fixed through a positive NFP.

Considering the amount of optimism placed on the NFP, anything but a better than expected print could be a disappointment. A disappointment in added jobs will likely send price action to former resistance points of 102.50 and 102.05. However, on an extension of risk, USDJPY will have the ability to reach 104.90 to 105.

1D Chart of USDJPY

1D Chart of USDJPY