Over the weekend we discussed the potential for a move higher on the USDJPY. More specifically, we were focused on the 111.70 handle along with the descending channel that has been in place throughout 2017.
Former resistance at 111.70 broke down on Monday, which meant a move higher toward 113.00 was the path of least resistance. Now that we’re here, all eyes turn to the upcoming non-farm payroll on Friday at 8:30 am EST.
A daily close above the 113.00 area could garner more attention from USDJPY bulls. Then again, 113.25 is another level that’s been a factor since November of last year. It’s also the 50% retracement of the current 2017 range.
Aside from NFP, there is another outside force that could dictate the path forward. As mentioned over the weekend, the outcome of the May 7th run-off election in France will no doubt affect the U.S. dollar to some degree.
But the result of the event also taps into the risk sensitivity of the Japanese yen. The outcome of the first round on April 23rd triggered a 130 pip gap on the USDJPY, and I don’t expect anything less for round two. Of course, which way it gaps will depend on how markets interpret the result.
The uncertainty alone is enough to keep me on the sideline for now. Even if the run-off election weren’t this weekend, I still wouldn’t want to enter with NFP less than 24 hours away.
With that said, the USDJPY has some great technical levels. So although I’m not trading it now, I will keep it at the top of my watch list for next week and beyond.
A daily close above 113.25 would expose 115.10 followed by 117.00. Alternatively, a move lower would likely encounter buying pressure at 111.70 followed by 110.10.
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