- Summary:
- USDJPY faces a mixture of sentiment with Japan's latest macroeconomic data becoming a non-event. We discuss what this means for the pair.
USDJPY returned to the upside on Monday, rising by 0.3 percent to trade at 150.45 at the time of writing. Investors are still digesting Friday’s mixed US labor market data, amid a high likelihood of interest slash by the Federal Reserve. Meanwhile, the market is increasingly growing convinced that the Bank of Japan (BoJ) will leave interest rates intact for the rest of the year.
US Nonfarm Payrolls rose by 227k in November, beating analysts’ projected figure of 220k. However, the news was neutered by the rise in the unemployment rate, which came in at 4.2 percent in November against a consensus forecast figure of 4.1 percent. That signals an underlying weakness in the US economy, which could prompt the Fed to announce an expected 25 basis points cut on interest rates.
Meanwhile, the Japanese yen lacks a decisive upward propulsion after the country’s key economic metrics released last week failed to sparkle. Japan’s Q3 GDP grew by 0.3 percent, largely in line with analysts’ forecasts. However, Domestic Demand printed at +0.5 percent, falling below the forecast estimate figure of +0.6%.
Weak domestic demand is a key factor that could under the BoJ’s move to raise interest rates before the year ends. That will add propulsion to the USDJPY trading pair. Also, yields on benchmark 10-year US treasury bonds rose by 27 basis points as of this writing to 4.18 percent, adding support to USDJPY.
USDJPY prediction
Pivot: USDJPY pivots at 150.10. Action above that level will favour the upside. Conversely, a break below it will signal the onset of downward momentum.
Reistance: The first resistance will likely come at 151.00. A stronger upward momentum will break above that level and test 151.60.
Support: The first support will likely come at 149.60. Breaking below that level will invalidate the upside the upside narrative. However, extended bearishness could send the price lower to test 148.90.
