Will bad NFPs push the USD/JPY towards 105.00?

April 03, 2020 10:00

Source: Economic Events April 3, 2020 - Admiral Markets' Forex Calendar

For weekly close, the eyes of forex traders around the globe will on the US employment report and the Non-Farm Payrolls (NFPs).

The ADP data on Wednesday, usually a good indication for today's NFP's, came in at only -27,000, while market participants expected it to be around -154,000 (and thus better than expected), but what counts can be read between the lines.

The ADP data only covered the period through March 12, being the period before the worst of the Coronavirus-induced economic freeze took place.

With that in mind, this new ADP dataset carries no good NFP-indication, and the risk of an acceleration of the bearish momentum in the USD/JPY in response to a print below expectations (currently at -100,000), driven by an even further drop in 10-year-US Treasury yields, seems a serious option.

On the other hand: if a new wave of risk-off hits global financial markets, under "normal" circumstances this would usually be a driver to lower the USD/JPY, this time such a risk-off has the potential to result in a sharp USD/JPY reversal. This being because we expect such a risk-off wave to go hand-in-hand with increasing demand for the US dollar given the global USD shortage.

So, while we need to wait to see if such a risk-off hits the markets and result in a strong USD demand; a test, or probably even break of the region around 112.00/30 is still on the table.

Nevertheless, given the recent bearish momentum in the USD/JPY, we currently favour further bearish momentum, especially with a disappoint NFP print, bringing a test of the region around 105.00 into play:

Source: Admiral Markets MT5 with MT5-SE Add-on USD/JPY Daily chart (between February 8, 2019, to April 2, 2020). Accessed: April 2, 2020, at 9:00pm 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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