After a horrific ADP: will NFP’s push the USD/JPY towards 105.00?

May 08, 2020 11:00

Source: Economic Events May 8, 2020 - Admiral Markets' Forex Calendar

On Friday, the eyes of traders around the world will be certainly on the Non-Farm Payrolls or NFP's.

That is particularly true, as after Wednesday's ADP data showed that private businesses in the US fired 20.2 million workers in April due to the Corona lockdown, but only slightly above market expectations at 20 million.

It was the biggest decline ever, and since ADP is usually a good indication for the Non-Farm Payrolls, it is certainly fair to assume that the market consensus at -21.5 million is probably not that far off.

Not surprisingly, the USD/JPY has already taken on bearish momentum, heading for a test of the region around 106.00 over the last days since it underlines one aspect of the last Fed statement and the willingness of the Fed to take further monetary action in a worsening economic situation.

While we certainly don't know how much of such a worsening economic situation was already priced into the Fed assumptions, it seems certainly fair to assume we should expect further monetary stimulus from the US central bank with ongoing bad economic projections, especially from the US labour market, putting further pressure on US yields, making a rather sooner than later a test of the region around 105.00 likely and even a drop lower.

Technically the picture only brightens slightly, if the currency par recaptures 107.80/108.00:

Source: Admiral Markets MT5 with MT5-SE Add-on USD/JPY Daily chart (between March 15, 2019, to May 7, 2020). Accessed: May 7, 2020, at 10:00pm GMT - Please note: Past performance is not a reliable indicator of future results, or future performance

In 2015, the value of the USD/JPY increased by 0.5%, in 2016, it fell by 2.8%, in 2017, it fell by 3.6%, in 2018, it fell by 2.7%, in 2019, it fell by 0.85%, meaning that after five years, it was down by 9.2%.

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