USDJPY Breaks Out Following NFP- Looking for Confirmation

DailyFX

Talking Points:

- USDOLLAR Breaks Bearish Trend as Non-Farm Payrolls Beats Forecast

- Japanese Yen Struggling to Maintain Bullish Momentum From May

Index

Last

High

Low

Daily Change (%)

Daily Range (% of ATR)

DJ-FXCM Dollar Index

10600.12

10616.44

10522.22

0.69

170.33%

USDOLLAR Daily

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Forex_USDJPY_Breaks_Out_Following_NFP-_Looking_for_Confirmation_body_Picture_3.png, USDJPY Breaks Out Following NFP- Looking for Confirmation

Chart - Created Using FXCM Marketscope 2.0

  • Breaks Out of Bearish Trend From July; Want Close Above Trendline Resistance
  • Relative Strength Index Carving Bullish Trend
  • Interim Resistance: 10,589 (50.0 retracement) to 10,615 (78.6 expansion)
  • Interim Support: 10,470 Pivot to 10,492 (November Low)

Release

GMT

Expected

Actual

Change in Nonfarm Payrolls (Oct)

13:30

120K

204K

Unemployment Rate (Oct)

13:30

7.3%

7.3%

Underemployment Rate (Oct)

13:30

13.8%

Two-Month Payroll Net Revision (Oct)

13:30

60K

Change in Private Payrolls (Oct)

13:30

125K

212K

Change in Manufact. Payrolls (Oct)

13:30

5K

19K

Average Hourly Earnings MoM (Oct)

13:30

0.2%

0.1%

Average Hourly Earnings YoY (Oct)

13:30

2.3%

2.2%

Average Weekly Hours All Employees (Oct)

13:30

34.5

34.4

Change in Household Employment (Oct)

13:30

-735K

Labor Force Participation Rate (Oct)

13:30

62.8%

Personal Income (Sep)

13:30

0.3%

0.5%

Personal Spending (Sep)

13:30

0.2%

0.2%

PCE Deflator MoM (Sep)

13:30

0.1%

0.1%

PCE Deflator YoY (Sep)

13:30

1.0%

0.9%

PCE Core MoM (Sep)

13:30

0.1%

0.1%

PCE Core YoY (Sep)

13:30

1.3%

1.2%

Univ. of Michigan Confidence (Nov P)

14:55

74.5

72.0

Fed's Lockhart Speaks on the Economy in Oxford, Mississippi

17:00

Bernanke, Fischer, Summers Speak on Financial Crises at IMF

20:30

Fed's Williams Speaks on Monetary Policy in Los Angeles

21:00

The Dow Jones-FXCM U.S. Dollar Index (Ticker: USDollar) broke out of the bearish trend as Non-Farm Payrolls climbed a whopping 204K in October, and the greenback may continue to retrace the decline from back in July as the fundamental outlook for the world’s largest economy improves.

Indeed, the dollar looks poise for a more meaningful rally amid the bullish momentum in the Relative Strength Index, and we would like to see a close above trendline resistance for added confirmation as it continues to find resistance around 10,589 (50.0 Fibonacci retracement) to 10,615 (78.6 Fibonacci expansion).

Nevertheless, a deeper look at the NFP report showed the jobless rate rising to an annualized 7.3% even as the Labor Force Participation Rate narrowed to 62.8 percent - the lowest reading since 1978 – while Average Hourly Earnings increased an annualized 2.2 percent amid forecasts for a 2.3 percent print.

The strong 3Q GDP report paired with the pickup in job growth may heighten the Fed’s scope to taper the asset-purchase program at the December 17-18 meeting, but the central bank may look to carry its highly accommodative policy stance into 2014 as discouraged workers continue to leave the labor force.

Forex_USDJPY_Breaks_Out_Following_NFP-_Looking_for_Confirmation_body_ScreenShot353.png, USDJPY Breaks Out Following NFP- Looking for Confirmation

USDJPY Daily

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Forex_USDJPY_Breaks_Out_Following_NFP-_Looking_for_Confirmation_body_Picture_1.png, USDJPY Breaks Out Following NFP- Looking for Confirmation
  • Bullish Break of Wedge/Triangle Formation
  • Relative Strength Index Retains Fails to Maintain Bearish Momentum from May
  • Interim Resistance: 99.00 Pivot to 99.20 (23.6 expansion)
  • Interim Support: 97.50 (38.2 retracement expansion) to 97.70 (38.2 expansion)

The greenback continued to gain ground against its major counterparts, with the Japanese Yen falling 0.98 percent, and the USDJPY looks primed for a move higher as it appears to be breaking out of the bearish trend dating back to May.

At the same time, the topside break in the RSI provides added conviction that we should look higher for the USDJPY, and it seems as though we’re on our way for a more meaningful move towards the 100.00 handle as the pair carves out a higher low in November.

In turn, we will cautious look to buy dips in the pair and would like to see a close above trendline resistance as well to confirm a more bullish forecasts for the USDJPY.

--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong.

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