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After the FED: USDJPY with bearish price action driven by weak ISM data?

November 01, 2019 09:00


USDJPY Economic Event

Source: Economic Events 01 November 2019 - Admiral Markets' Forex Calendar

Today, our main focus is the yield-sensitive USDJPY and the Non-Farm Payrolls, including the ISM Manufacturing data set.

After the FED cut rates by 25 basis points on Wednesday without delivering any significant further impulses or signs in regards to future monetary policy steps, today it will be interesting to see what the next economic data sets like the NFPs and the ISM Manufacturing data deliver.

This is especially true since the FED removed in her statement the sentence "Will Act As Appropriate" and replaced it with a more data-dependent one "Will Monitor Implications of Incoming Information for the economic outlook as it assesses the appropriate path of the target range for the fed funds rate".

So, if the ISM data continues to trend lower and result in rising recession fears (for September, the ISM Manufacturing dropped to 47.8, the steepest contraction in the manufacturing sector since June 2009), expectations of another rate cut by the FED in December could see a significant push higher, resulting in the US dollar facing heavier selling pressure into the weekly close.

The technical relevant and, in our opinion, make-or-break level in the USDJPY can be found in the region around 108.00/30. A sustainable break below activates 106.80/107.00 as a next target on the downside.

On the other hand: better than expected NFPs and ISM Manufacturing data could lead to some USD stabilisation. And an increasing risk-on approach among market participants and resulting JPY selling could result in another attack of the region around 109.00, even though chances of a sustainable break higher remain low in our opinion, especially after the sharp drop on Thursday.

USDJPY Daily chart

Source: Admiral Markets MT5 with MT5SE Add-on USDJPY Daily chart (between 14 September 2018 to 31 October 2019). Accessed: 31 October 2019 at 10:00 PM GMT

Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2014, the value of USDJPY increased by 13.7%, in 2015, it 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%, meaning that after five years, it was up by 4.1%.

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