USDJPY Tumbled Amid Mixed Job Results

Andreas Thalassinos
Andreas Thalassinos

11.3.2024

The latest employment figures in the United States have produced mixed results, leading to uncertainty in the market.  Additionally, speculation surrounding the Bank of Japan's potential exit from its negative interest rate policy has contributed to a downward trend in the USDJPY exchange rate, resulting in four consecutive bearish trading sessions.

Overview

The latest employment figures in the United States have produced mixed results, leading to uncertainty in the market.  Additionally, speculation surrounding the Bank of Japan's potential exit from its negative interest rate policy has contributed to a downward trend in the USDJPY exchange rate, resulting in four consecutive bearish trading sessions.

To make informed trading decisions in the market, it is important to keep a keen eye on the market dynamics of demand and supply while staying informed about economic events and geopolitical developments.


Upcoming Economic Events

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Thursday 12:30 pm (GMT): Unemployment Claims
Friday 12:30 pm (GMT): Empire State Manufacturing Index
Friday 02:00 pm (GMT): Prelim UoM Consumer Sentiment


Fundamentals

The US Bureau of Labor Statistics (BLS) published its NFP report for February, which showed an increase in total Nonfarm Payroll employment by 275,000, exceeding the market forecast of 195,000.  However, the unemployment rate also rose by 0.2 percentage points to 3.9 percent, and the number of unemployed people increased by 334,000 to 6,458,000.  A year earlier, the jobless rate was 3.6 percent, and the number of unemployed people was 6.0 million.

The Labor Force Participation Rate remained unchanged at 62.5% for the third consecutive month.  In addition, the average hourly earnings for all employees on private nonfarm payrolls increased by 5 cents to $34.57 in February, following an increase of 18 cents in January.

Technical Analysis

The USDJPY exchange rate has been on an upward trajectory since December 28, when the price formed a Hammer reversal pattern while bouncing off its twenty-two-week low of 140.249.  This set the stage for higher exchange rates, and on February 13, the currency pair marked its year's high at 150.881.  Since then, the USDJPY has significantly increased, as indicated by the formation of successive higher peaks and higher troughs on the price chart.  However, the presence of a Shooting Star and a negative divergence between the price and the Momentum oscillator alerted for an impending reversal.

On March 6, the price breached the key support at 149.207, paving the way for a decline.  Both the 50-period Moving Average and the Momentum Oscillator support the bearish outlook.  Specifically, prices are trading below the Moving Average line, indicating a downward bias, while the Momentum Oscillator declined below its 100 baseline, further supporting the bearish scenario. 


Downside Potential Targets

Should the bearish momentum continue to dominate the market, there are four potential downside targets that traders may consider:

145.895: The first target stands at 145.895, aligning with the trough established on February 1.
145.172: The second price objective is estimated at 145.172, representing the 4.236% Fibonacci extension linked to the swing, formed by the trough at 149.207 and the peak at 150.569, respectively.
143.417: An additional potential price objective could be identified at 143.417, representing the support formed on January 9.
140.249: The fourth price objective is observed at the twenty-two-week low of 140.249, marked on December 28.

Upside Potential Targets

In the event that the price breaks above the key resistance of 149.207, the bearish scenario will be invalidated, and the following targets may be considered:

150.881: The first target is set at 150.881, matching the year's high achieved on February 13.
151.906: The second target is in line with the peak of 151.906  established on November 13.

Conclusion and Considerations

In summary, the USDJPY's current trend is downward due to mixed Nonfarm Payroll results that were published last Friday.  However, the US Dollar Index rebounded from its low at the end of the week and formed a Hammer reversal pattern to the upside, which raises concerns about a potential upward correction that cannot be ignored.  This analysis is based on several factors, including NFP results, concerns for a slowdown in global demand, potential exit of the Bank of Japan's negative rates, and the potential strengthening of the US dollar.  To navigate the highly volatile financial markets, traders must stay informed about economic events and geopolitical changes, enabling them to make well-informed trading decisions.

 

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Andreas Thalassinos
Andreas Thalassinos

Andreas Thalassinos is a recognized authority in the financial markets and world renowned for his expertise in algorithmic trading. He is a Certified Technical Analyst and highly respected lecturer in the education of traders, investors, and financial markets professionals. Thalassinos has played a key role in the development of education within the industry, training tens of thousands of traders of all skill levels. Traders value his seminars and workshops for the rich content, his passionate, charismatic, and lively presentations.