Market Analysis

USDJPY: Coming to terms with disappointing nonfarm payroll numbers

Last Friday, US Department of Labor released the nonfarm payrolls that showed a drop by 155K in November, compared to the downwardly revised 237K registered in October and failed analysts’ estimates of 200K. Job gains occurred in health care, in manufacturing, in transportation and warehousing. The significantly softer than expected payrolls number adds to recent data suggesting a downturn in the US economic momentum that could result in the Federal Reserve (Fed) taking a timeout after a fourth and final interest hike later on December 19. This, after reports about a potential switch into a wait-and-see mode in 2019, and more importantly latest cautious FOMC comments from Chair Powell.

Traders remain tense ahead of this week opening because of boiling tensions between the US and China. Although the two economic powerhouses have a little less than 90 days to reach a trade agreement, concerns were raised last week when Canadian officials arrested the CFO of a major Chinese technology Huawei company. Additionally, the US is expected to announce the arrests of Chinese hackers of US technology firms.

The Japanese gross domestic product (GDP) fell to -0.6% quarter-on-quarter in the third quarter, compared to the -0.3% contraction registered in the previous period and missing analysts’ forecast of -0.5% decline. GDP is a gross measure of market activity because it indicates the pace at which the Japanese economy is growing or decreasing. A high reading or a better than expected number is seen as positive for the JPY, while a low reading is negative.

Since the beginning of the year 2018 until last Friday close, the USDJPY is relatively flat with a minor gain of 0.08% and since the start of December is underwater with a loss of more than 0.8%. Nonetheless, the currency pair ended the past week with on a softer tone losing almost 0.9% although, on the daily time-frame, closed shy in the red with a minor loss of 0.02%. Furthermore, the USDJPY made a phase change, shifting from a bullish to a warning phase.

On last Friday session, the currency pair went back and forward without any clear direction, consequently closed in the middle of the daily range, in addition, managed to close within Thursday range, which suggests being clearly neutral, neither side is showing control.

The stochastic is showing lack of momentum but is below the 50 midline.

The currency pair tried to break the daily resistance two times in a row in November without any success that led to the sharp downward correction made in early December. The downward move made by USDJPY halted near November low at 112.30 where it found enough buying pressure, however, did not have the strength to close above the 50-day moving average. Seems that the currency pair is trading within a range that rune from 113.957 down to 112.300 and until the price breaks above the 50-day moving average this should act as a dynamic resistance.


USD/JPY Daily Candlestick Chart

USD/JPY Daily Candlestick Chart


Watch out this Week


December 12 at 13:30 GMT (08:30 PM ET):  US Bureau of Labor Statistics, will release the US consumer price index (CPI) year-on-year in November, which is expected a drop to 2.2% compared to the 2.5% increase registered in October. The CPI is a key indicator to measure inflation and changes in purchasing trends. A high reading is seen as positive for the USD, while a low reading is seen as negative. On the same day but at 15:00 GMT (10:00 PM ET) the Federal Reserve (Fed) Governor Jerome H. Powell is scheduled to speak. As head of the Fed, which controls short-term interest rates, he has more influence over the US dollar value than any other person does. Traders closely watch his speeches as they are often used to drop hints regarding future monetary policy.


December 13 at 13:30 GMT (08:30 PM ET): The US Department of Labor is scheduled to release the initial jobless claims in the week ending December 7, which is expected to drop to 230K comparing to 231 registered on November 30. A larger than expected number indicates weakness in this market that influences the strength and direction of the US economy. Normally, a decreasing number should be taken as positive for the USD.


December 14 at 13:30 GMT (08:30 PM ET): The US Census Bureau is scheduled to release the US retail sales month-on-month in November which is expected to drop to 0.2% comparing to 0.8% registered in October. A high reading is seen as positive for the USD, while a low reading is perceived as negative.


Written by Hugo O’Neill, External Analyst


*The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and as such is to be considered to be a marketing communication.

All information has been prepared by ActivTrades PLC (“AT”). The information does not contain a record of AT’s prices or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not a reliable indicator of futures performance. AT provides an execution-only service. Consequently, any person acting on the information provided does so at its own risk.