The USD/JPY is easily holding above 108.00 – will today’s NFPs change this?

January 10, 2020 10:30

Source: Economic Events January 10, 2020 - Admiral Markets' Forex Calendar

Despite the recent developments in the Middle East since the US Pentagon launched an airstrike that killed Iranian commander Soleimani, stoking fears that a war between the US and Iran could be in the near future, the overall picture in the USD/JPY didn't substantially change.

With no sustainable risk-off hitting the market and volatility staying all in all quite low, a sustainable drop below 108.00 wasn't seen, in fact the USD/JPY is currently trading back above 109.00 and in positive territory for the week.

Whether this will change or not is not only dependent on the developments in regards to the US and Iran, but also dependent on today's Non-Farm Payroll data set which will be published at 1330 GMT.

The consensus for December lies at 164,000, after NFPs increased by 266,000 in November 2019. Main driver for the solid print in December was certainly the strong number from the manufacturing sector, reflecting the return of workers from a GM strike. But given the latest ISM Employment numbers and without striking workers returning, this month's NFPs could likely disappoint.

If so and expectations of market participants of at least one 25 basis point cut in 2020 keep on increasing significantly above 70% (currently and according to the Fed Watch Tool we see a likelihood of ~60%), the USD/JPY could see another drop down to 108.00.

In general, we still consider the USD/JPY an attractive short candidate from a risk-reward perspective midterm.

Technically, the main focus stays on 106.80/107.00, where, from a technical perspective, a break lower could result in a drop as low as 105.00 and probably even lower.

On the other hand: a push above 110 activates 110.70, playing into the cards of USD/JPY bulls, at least short-term:

Source: Admiral Markets MT5 with MT5-SE Add-on USD/JPY Daily chart (between October 30, 2018, to January 9, 2020). Accessed: January 9, 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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