The yen strengthened ahead of key data this week and USDJPY falls on support. Tomorrow, the US reports ADP non-farm payrolls and new homes sales, while on Thursday the European Central Bank (ECB) releases their key rate decision.
Uncertainty of the data outcome and it’s implications on a taper is what is causing the yen to head higher and break from its lows. “I see it as a definitely a consolidation because you have some big numbers, some big events coming up — you have the ECB on Thursday and also payrolls on Friday,” said Sireen Harajli, a strategist at Mizuho Bank.
The USDJPY pulled back from its trending movement, but price action is currently supported and could provide a good buying opportunity. Positive data tomorrow should allow the USDJPY to rise on yen selling, but the pair’s direction is unlikely to be determined in the Asian market trade, where equities head lower.
If price action breaks support at 102.36, price action will likely head lower to 101.16, with the 20 EMA acting as dynamic support at 101.05. However, a rally in USDJPY on positive data will aim to break 103 with the potential to challenge the 103.72 high by the week’s end.
This move lower could be due to profit taking in equities, both seen in the US and global equity markets as they get a bit ahead of themselves. Same thing in the USDJPY. “In terms of the yen, we’ve had basically a straight shot from the beginning of November over the last month,” Robert Sinche, global strategist at Pierpont Securities Holdings LLC.