USD/JPY Faces an Uphill Task, Focus Turns to US NFP

Key Highlights

  • The US Dollar found support after trading as low as 108.28 against the Japanese Yen.
  • There is a major bearish trend line forming with resistance at 110.30 on the 4-hours chart of USD/JPY.
  • The US Initial Jobless Claims for the week ending Jan 27, 2018 declined from 231K to 230K.
  • Today’s US NFP release could impact USD/JPY and the next move in the near term (Forecast 180K versus 148K previous).

USD/JPY Technical Analysis

This past week was very bearish since the US Dollar declined below 110.00 against the Japanese Yen. Later, the USD/JPY pair found support near 108.30 and is currently recovering.

USD/JPY Technical Analysis US Dollar Japanese Yen

Looking at the 4-hours chart of USD/JPY, there was a sharp downside move once the pair broke the 110.40 and 110.30 support levels. It fell by around 200 pips and traded as low as 108.28.

Later, it started consolidating losses and slowly moved above the 23.6% Fib retracement level of the last decline from the 111.22 high to 108.28 low.

However, there are many barriers on the upside for buyers around the 110.00 level. There is also a major bearish trend line forming with resistance at 110.30 on the same chart.

More importantly, the mentioned 110.30 level was a support earlier, and now it is likely to act as a resistance. Furthermore, the 100 simple moving average (red, 4-hours) is also positioned at 110.25. Finally, the 61.8% Fib retracement level of the last decline from the 111.22 high to 108.28 low is at 110.10.

Therefore, there is a cluster of resistances starting with 110.00 up to 110.40. It won’t be easy for the US Dollar buyers to gain momentum above the 110.00-110.40 levels.

On the downside, an initial support sits at 108.80. Below 108.80, the last low at 108.28 holds the key. Should the pair fail to move past 110.40, it could decline back to challenge 108.80.

US NFP and Possible Outcomes

Today, the US will see an important economic release since January’s nonfarm payrolls figure will be reported by the US Department of Labor. The market is looking for an increase of 180K, more than the last 148K.

There could be three possible scenarios:

  1. The actual beats the forecast with a count of more than 180K. In this case, there are high chances of USD/JPY moving toward 110.40 and it could even break it.
  2. NFP comes around 165K-180K, and USD/JPY extends the current consolidation phase.
  3. NFP declines and the actual is around 140-160K. In this scenario, USD/JPY could start a fresh downside move.

The overall market sentiment is stable heading into the stated high risk event (NFP). EUR/USD is slowly moving above 1.2400 and GBP/USD is consolidating gains above 1.4150.

Aayush Jindal

Aayush is a Senior Forex, Cryptocurrencies and Financial Market Strategist with a background in IT and financial markets. He specialises in market strategies and technical analysis, and has spent over a decade as a financial markets contributor and observer. He possesses strong technical analytical skills and is well known for his entertaining and informative analysis of the currency, commodities, Bitcoin and Ethereum markets.

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